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RE5 Training Manual – Updated May 2018 1
Representative
Regulatory Exam
Workshop Material
(RE5)
Financial Advisory and Intermediary
Services Act No 37 of 2002
RE5 Training Manual – Updated May 2018 2
TableofContents
Table of Contents .................................................................................................................. 2
Introduction to the material .................................................................................................. 7
The History of FAIS – FAIS Act 37 (2002) .............................................................................. 10
Latest updates in the Financial Services Sector .................................................................... 12
Objectives of the FAIS Act .................................................................................................... 13
The FSB ................................................................................................................................ 13
FAIS Division .................................................................................................................... 14
FAIS Departments ......................................................................................................... 15
FAIS Role Players ................................................................................................................. 16
Glossary of terms, including the Role Players: .................................................................. 16
Registrar vs Commissioner ................................................................................................... 19
What is Financial Services .................................................................................................... 19
What is Advice ................................................................................................................. 20
What is automated advice ............................................................................................ 20
Advice is not about: ......................................................................................................... 22
What is Intermediary Services? ........................................................................................ 23
The Representative .............................................................................................................. 25
Appointment of representatives ...................................................................................... 26
Entry level requirement for Reps...................................................................................... 27
Recruiting Reps ................................................................................................................ 28
Supervision of Reps .......................................................................................................... 29
What does it mean when a rep works under supervision .............................................. 29
Selection of Supervisor ................................................................................................. 29
Supervision agreement ................................................................................................. 29
Supervisor responsibilities ............................................................................................ 29
Representative under supervision (supervisee)’s responsibilities ................................. 31
The requirements of a Rep ............................................................................................... 31
The roles and responsibilities of a Rep ............................................................................. 32
When a Rep provides advice ............................................................................................ 33
Steps to be taken when providing advice to the client: ................................................. 33
RE5 Training Manual – Updated May 2018 3
When a client receives advice from a rep ......................................................................... 36
Incomplete or no FNA ................................................................................................... 36
Choosing a different product ........................................................................................ 36
The Fit & Proper Requirements that apply to Representatives ......................................... 36
What does Honesty and Integrity refer to? ................................................................... 37
COMPETENCE: .............................................................................................................. 40
Experience requirements for Reps ................................................................................ 48
Experience applies to all FSP’s, KI’s and Reps ................................................................... 48
Experience lapses for an FSP, KI or rep if particular service for particular financial product not worked with for 5 years ............................................................................................. 48
Operational requirements for Reps .............................................................................. 48
Representative Register ................................................................................................... 48
What information must be contained in the Representative Register? ......................... 49
What is the purpose of the Rep Register? ..................................................................... 49
Debarring a Representative .............................................................................................. 49
Right of appeal ............................................................................................................. 51
Process of Appeal ......................................................................................................... 51
Reappointment of debarred reps ................................................................................. 51
Key Individuals ..................................................................................................................... 52
A Key Individual is someone who ..................................................................................... 52
Responsibilities of a KI...................................................................................................... 52
Fit and Proper Requirements that apply to KI’s ................................................................ 53
All Fit & Proper requirements that relate to Reps, also relate to Key Individuals. Over and above that, KI’s need the following – ............................................................................... 53
Qualification requirements ........................................................................................... 53
Experience requirements relating to KI’s .......................................................................... 53
Management Responsibilities of the KI ............................................................................ 54
The Financial Services Provider ............................................................................................ 56
Responsibilities of the FSP ................................................................................................ 56
An FSP must ensure that: ................................................................................................. 56
Fit & Proper Requirements that apply to FSP’s ................................................................. 57
All Fit & Proper requirements that relate to Reps and Key Individuals, also apply to FSP’s. Over and above that, FSP’s need the following – .............................................................. 57
Operational Ability ....................................................................................................... 57
Financial Soundness ..................................................................................................... 58
Application requirements to become an FSP .................................................................... 59
RE5 Training Manual – Updated May 2018 4
Changes that must be reported to the FSB (now the FSCA)........................................... 60
Licenses granted by the Registrar ..................................................................................... 61
After granting the license, the Registrar may: .................................................................. 62
Displaying and disclosing the FSP License ......................................................................... 62
Responsibilities of the FSP to ensure the KI’s Fit and Proper Status .................................. 62
What must a Financial Services Provider (FSP) do? ........................................................... 63
Control measures required by the FSP relating to Risk Management ............................ 63
How Risk Management relates to the FSP: ................................................................... 63
FSP’s Governance Framework ...................................................................................... 64
Additional requirements applicable to FSPs that provide automated advice .................... 65
OUTSOURCING ................................................................................................................. 66
Outsourcing of functions to a person other than a representative of the FSP ............... 66
Maintaining a license ........................................................................................................... 67
Undesirable Business Practice .......................................................................................... 67
Suspension or Withdrawal of License ............................................................................... 68
Process to be followed when suspending or withdrawing the license ........................... 68
Lapsing a license .............................................................................................................. 70
Process to be followed when lapsing a license .............................................................. 70
Format of communication with the Regulator .................................................................. 71
General Code of Conduct ..................................................................................................... 71
The purpose of the Code of Conduct ................................................................................ 71
The Code of Conduct must make provision for ................................................................. 71
Disclosure requirements: ................................................................................................. 72
When rendering financial services to clients, ................................................................ 72
What information needs to be disclosed?..................................................................... 73
Ethical conduct ................................................................................................................ 74
Termination ..................................................................................................................... 75
A provider that ceases to operate must ........................................................................ 75
Where a representative ceases to operate, the provider must ..................................... 75
Record of advice .............................................................................................................. 75
Client confidentiality and access to records...................................................................... 76
FSP’s who receive or hold client funds or products .......................................................... 76
Conflict of Interest ........................................................................................................... 77
What does conflict of interest refer to? ........................................................................ 77
Ensuring transparency and manage conflict of interest: ............................................... 77
RE5 Training Manual – Updated May 2018 5
The conflict of interest management policy must ......................................................... 78
Complaints handling ........................................................................................................ 79
Internal Complaints resolution system ......................................................................... 79
Advertising ....................................................................................................................... 83
When a provider advertises by telephone .................................................................... 83
When a provider advertises a financial service by means of a public radio service........ 84
Record keeping ................................................................................................................ 84
Penalties in terms of the Act ................................................................................................ 85
The Compliance Officer: ...................................................................................................... 86
Roles and functions of a Compliance officer ..................................................................... 86
Approval of a Compliance Officer by the Registrar ........................................................... 87
Phase 1 approval .......................................................................................................... 87
Phase 2 approval .......................................................................................................... 87
Responsibilities of the Compliance Officer and FSP .......................................................... 90
Reportable Irregularities .................................................................................................. 91
Withdrawal of approval ................................................................................................... 91
The FAIS Ombudsman.......................................................................................................... 91
Roles and powers of the Ombud ...................................................................................... 92
Submission of a complaint to the Ombud......................................................................... 92
Instances of when the FAIS Ombud will not accept the complaint.................................... 92
Prescription period .......................................................................................................... 93
Decline to investigate ....................................................................................................... 93
Investigation of the complaint.......................................................................................... 93
Matters not settled or not accepted by all parties ............................................................ 94
Monetary awards ............................................................................................................. 94
The determination by the Ombud .................................................................................... 95
Rules of proceedings by the office of the Ombud ............................................................. 96
Penalties .......................................................................................................................... 96
Schedule 1 – Laws amended or repealed by the FAIS Act: .................................................... 96
Product Categories .............................................................................................................. 97
The product categories in FAIS ......................................................................................... 97
FICA ................................................................................................................................... 109
Purpose of FICA .............................................................................................................. 110
Training and compliance with FICA ................................................................................ 110
Record Keeping .............................................................................................................. 110
RE5 Training Manual – Updated May 2018 6
Accountable institutions need to keep records of the following: ................................ 110
Methods of Record Keeping ....................................................................................... 111
Records kept by a 3rd party ........................................................................................... 111
Admissibility of the Records ........................................................................................... 112
Centre’s access to Records ............................................................................................. 112
Internal Rules ................................................................................................................. 112
What is Money Laundering ............................................................................................ 113
Additional sources for money laundering: .................................................................. 113
Offences and Penalties ................................................................................................... 113
Transactions to be reported ........................................................................................... 116
Cash Reporting ........................................................................................................... 116
What is the prescribed limit? ...................................................................................... 116
International Electronic Transfers ............................................................................... 116
Exemptions .................................................................................................................... 117
Verifying the residential address of a client: ................................................................... 118
Manner of identification ................................................................................................ 119
List of accountable institutions....................................................................................... 119
Reportable Institutions .................................................................................................. 121
Glossary of Terms on FICA .............................................................................................. 121
Transitional Provisions ....................................................................................................... 123
Qualifications; ................................................................................................................ 123
Experience ..................................................................................................................... 123
Product Specific Training ................................................................................................ 123
Class of Business training ............................................................................................... 124
However (Very Important) .......................................................................................... 124
Reps register and FSP licence ......................................................................................... 124
Summary of timelines ........................................................................................................ 125
Annexure 1 ........................................................................................................................ 129
Tier 1 and Tier 2 Financial Products ................................................................................ 129
Annexure 2 ........................................................................................................................ 130
CLASSES OF BUSINESS .................................................................................................... 130
Sources: ............................................................................................................................. 133
RE5 Training Manual – Updated May 2018 7
Introductiontothematerial
The following tasks are necessary to know for the RE5 exams (updated April 2018)
TABLE 4: REGULATORY EXAMINATION: REPRESENTATIVES IN ALL CATGORIES OF FSPs TABLE 4
Task No
Task QC Qualifying Criteria Knowledge (K) or Skills
(S) 1 Demonstrate
understanding of the FAIS Act as a regulatory framework
1 Describe the FAIS Act and subordinate legislation.
K
2 Provide an overview of the financial services and different types of financial products a Representative can deal with.
K
3 Apply knowledge of the financial products within the financial services environment.
S
4 Describe the role and functions of a Compliance Officer.
K
2 Contribute towards maintaining an FSP license.
1 Explain the requirements an FSP must meet to maintain an FSP license.
K
2 Assist in maintaining an FSP license by executing the required actions as a Representative, in terms of the Act.
S
3 Discuss the requirements around the display of licenses.
K
4 Explain the implication for a Representative if an accreditation is suspended or withdrawn or lapsed in terms of the Medical Schemes Act, 1998, or any other enabling legislation.
K
5 Explain what is meant by “undesirable practices.”
K
6 Check that the execution of duties and actions as a Representative does not constitute as undesirable business practices.
S
7 Describe the implication for a Representative if the Registrar declares a business practice to be undesirable.
K
8 Explain the reparation measures available to the Registrar if a Representative continues with undesirable business practices.
K
RE5 Training Manual – Updated May 2018 8
9 Describe the offences prescribed by the FAIS Act.
K
3 Define the role of the Key Individual in terms of the FAIS Act.
1 Describe the role and responsibilities of key individuals as defined in the FAIS act.
K
2 Describe the regulated management and oversight responsibilities of a key individual.
K
3 Explain the implications for a representative should a key individual no longer meet the good standing, honesty and integrity requirements.
K
4 1 Describe the general and specific duties of a provider.
K
2 Describe what could possibly a conflict of interest.
K
3 Define the requirements and impact of the disclosure rules on the FSP.
K
4 Apply the requirements of the General Code of Conduct for FSPs and Representatives
S
5 Explain the disclosures that need to be made by a Representative before rendering a financial service.
K
6 Explain disclosures that must be made by a Representative when rendering a financial service.
K
7 Describe the required disclosures regarding the provider, product supplier and financial service.
K
8 Explain the specific disclosure requirements regarding fees and commission.
K
9 Apply disclosure requirements in terms of financial services.
S
10 Explain the process of advice that should be followed by a Representative.
K
11 Explain the requirements when a Representative receives custody of financial products and funds.
K
12 Explain the manner in which complaints are to be handled by a Representative as required by the General Code of Conduct for FSPs and Representatives.
K
13 Follow the complaints procedures and processes that are in place for Representatives.
S
14 Explain the requirements of the General Code of Conduct for FSPs and Representatives relating to the termination
K
RE5 Training Manual – Updated May 2018 9
of an agreement. 5 Comply with
regulated record keeping requirements
1 Explain the record keeping obligations by a Representative as prescribed by the FAIS and FIC Acts.
K
2 Carry out the record keeping and retrieval of records functionality correctly.
S
6 Comply with the requirement of the FIC Act and Money Laundering and Terrorist Financing control regulations, as it applies to the FSP.
1 Explain the requirements specific to an FSP prescribed by the FIC Act.
K
2 Describe how the FIC Act impacts a Representatives’ interaction with a client.
K
7 Dealing with complaints that have been submitted to the Ombud for FSPs.
1 Explain the role and authority of the Ombud for FSPS
K
8 Operate as a Representative in terms of the FAIS Act.
1 Describe the role and responsibilities of Representative as defined in the FAIS Act.
K
2 Apply knowledge of the role of Representatives in terms of the FAIS Act.
S
3 Explain the fit and proper requirements that apply to Representatives ( good standing, honesty, integrity, qualifications, experience, knowledge tested through regulated examinations and continues professional development)
K
4 Distinguish between advice and intermediary services in terms of the FAIS Act.
K
5 Describe the purpose and requirements of the register of Representatives.
K
6 Explain when a Representative should be under supervision.
K
7 Explain the disclosure requirements for a Representative under supervision.
K
8 Describe the implications if a Representative no longer meets the fit and proper requirements.
K
9 Define the purpose of debarment. K 10 Describe when debarment should be
considered. K
11 Explain the debarment process that should be followed in the event of a possible contravention of the FAIS Act.
K
12 Explain what recourse a debarred representative may have.
K
RE5 Training Manual – Updated May 2018 10
For the purposes of the training manual, we did not follow the tasks in chronological order,
however, we have designed the material to make it easier to follow and study. A
combination of the FAIS Act, subordinate legislation, FSB communication, tools used by
compliance officers, our own knowledge and INSETA material was used to design and
develop the material.
TheHistoryofFAIS–FAISAct37(2002)
The Financial Services Board was established in 1990, aimed at creating an independent
body to supervise and regulate the non-banking financial services industry. The Financial
Services Board (FSB) is the government of South Africa’s financial regulatory agency
responsible for the non-banking financial services industry in South Africa. It is an
independent body that supervises and regulates the financial services industry in the public
interest.
In the past, South Africa never had a formal system of regulating financial advisors and
intermediary services. The FAIS Act came into law in November 2002, however, drafting of
the Act (then still termed a Bill before being enacted) started as early as 1993. The idea
behind bringing in new legislation was to:
- Provide consumer protection in terms of financial products; and
- Enhance the integrity of the South African financial services industry.
During the drafting process, several drafts of the Bill were put on the FSB’s website,
followed by statements in the media inviting comments. In addition to this, and given the
fact that the Bill attracted interest from all the different industry players within the financial
services sector, a number of workshops, as well as several road shows were hosted by the
FSB. These events covered discussions around the contents of the then Bill and its possible
impact on the industry.
RE5 Training Manual – Updated May 2018 11
The purpose of the Financial Advisory and Intermediary Services Act (FAIS Act) is to regulate
the activities of all financial service providers who give advice or provide intermediary
services to clients as regards to certain financial products. The Act requires that such
providers be licensed and that professional conduct be controlled through a code of
conduct and specific enforcement measures. One of the main reasons behind the
enactment of FAIS was to create uniform standards that must be adhered to by all
applicants and holders of an FSP license.
The FAIS Act applies to anybody that offers financial advice and/or provides an intermediary
service to a client on any transaction that has to do with a financial product.
FAIS aims to regulate the giving of advice and rendering of intermediary services to clients,
and imposes responsibility by requiring that
i) the financial needs of the client has to be evaluated,
ii) appropriate advice - having established the relevant facts – is to be given, and
iii) clients be assisted to make informed decisions, whilst establishing a
complaints resolution mechanism.
The Act requires that competent and qualified persons render services and give advice (so
called “fit and proper requirements”) in order for clients to receive sound financial advice,
services and products tailored to their individual needs. An untrained representative should
never be allowed to give advice, hence the requirement that an advisor be FAIS accredited.
FAIS Act aims to achieve the following:
1. Professional Conduct
2. Better informed client
3. Professional and responsible sector
RE5 Training Manual – Updated May 2018 12
LatestupdatesintheFinancialServicesSector
As from the 1st of April 2018, the FSB is now being replaced with FSCA – The Financial Sector
Conduct Authority. This is as a result of the Twin Peaks Model of financial sector regulation
(regulating both the banking and non-banking financial services sector)
The FSCA’s key objectives are to:
• Protect customers by promoting their fair treatment by financial institutions,
providing education and promoting financial literacy;
• Enhance and support the efficiency and integrity of financial markets;
• Assist in maintaining financial stability; and
• Support inclusion and transformation in the financial sector.
The FSCA says there won’t be a “big bang” approach to the implementation of its mandate,
but gradual changes over the course of the year as sections of the FSRA come into
operation. “In the main, financial institutions can expect their interactions with us to be
business as usual in the short term.”
It says there are, however, a few immediate changes:
• All communications, regulatory actions and decisions will now be in the name of the
FSCA.
• The new website, www.fsca.co.za, is live. All the key information that was available
on the FSB website is still accessible.
• A Financial Sector Tribunal has been established, which any entity aggrieved by an
FSCA decision can approach for adjudication. The tribunal replaces the FSB Appeal
Board.
In terms of the FSRA (Financial Services Regulation Act, signed into law on the 21st of August
2017) , a commissioner and deputy commissioners will make up the executive committee
that will lead the FSCA.
RE5 Training Manual – Updated May 2018 13
The minister published regulations setting out the process whereby the commissioner and
deputy commissioners will be appointed, and it is expected that this process will start soon,
says the FSCA.
Source: https://www.iol.co.za/personal-finance/fsb-makes-way-for-fsca-14316164
published 9 April 2018
ObjectivesoftheFAISAct
• To regulate the rendering of certain financial advisory and intermediary services to
clients
• to repeal or amend certain laws
• to provide for matters incidental thereto
TheFSB
The Financial Services Board (FSB) is an independent institution established by statute to
oversee the South African Non-Banking Financial Services Industry in the public interest. Its
mission and vision are to promote and maintain a sound financial investment in South
Africa.
The FSB is there to ensure that clients are treated fairly by the financial services providers
they deal with, and that they enjoy a safe investment environment. The FSB prevents many
South Africans from losing their hard earned money to illegal money making schemes. A
client can confirm with the FSB whether the entity they are dealing with has a valid FSB
licence because only licensed providers are authorised to sell financial products. It is
important to note that the FSB does not regulate or follow up on pyramid schemes, as the
South African Reserve Bank takes on this responsibility.
RE5 Training Manual – Updated May 2018 14
The Financial Services Board (FSB) oversees the non-banking financial services industry,
which includes retirement funds, short-term & long-term insurance, companies, funeral
insurance, schemes, collective investment schemes (unit trusts and stock market) and
financial advisors and brokers.
The FSB has the following departments:
• Actuarial
• Capital Markets
• Collective Investment Schemes
• Consumer Education
• Credit Ratings
• FAIS
• Information Centre
• Insurance
• International and Local Affairs Unit
• Legal and Policy
• Market Abuse
• Market Conduct Strategy Unit
• Retirement Funds
Only one department within the FSB (now FSCA) deals with FAIS, which again consists of a
further four departments, being:
FAIS Division FAIS is a division within the FSB (now FSCA) that is set up to administer the Financial
Advisory and Intermediary Services Act, 37 of 2002 whose aim is to protect the investors
and to professionalise the financial services industry.
They register FSP’s after being satisfied that they meet the fit and proper requirements,
supervise such providers on an on-going basis to ensure that they comply with the duties
imposed by the Act at all times and take the necessary regulatory action against those who
do not comply, which include unregistered entities or persons.
RE5 Training Manual – Updated May 2018 15
FAIS Departments
Registration: • New licence applications;
• profile changes; (amendments to licenses)
• updating the central representative register
• approval of mandates and application forms for Cat II and III FSP’s
• liaison with Finance Department of FSB (now FSCA) relating to collection of
levies
Supervision: • lapsing of licenses
• receipt and analysis of financial statements and compliance reports
• conduct onsite visits to FSP’s and compliance officers
• liaison with industry relating to changes and subordinate legislation
Compliance • deals with complaints against FSP’s that cannot be referred to FAIS Ombud
• investigations into the affairs of FSP’s
• regulatory action – suspensions and withdrawals of licenses
• debarments related to regulatory action
Enforcement • interaction between the FAIS Division and the FSB (now FSCA) Enforcement
Committee
• updating debarments on the central representatives register
• reinstatement of representatives on the central register
Source: www.fsb.co.za
RE5 Training Manual – Updated May 2018 16
FAISRolePlayers
Glossary of terms, including the Role Players:
Term Definition from the Act
Representative These are the persons who render a financial service to clients for or on
behalf of an FSP, in terms of any employment or other mandatory
agreement. These persons must be Employed or Mandated.
Key Individual These are natural persons within the FSP who are either managing or
overseeing the activities of the FSP relating to financial services. It also
includes a corporate or unincorporated body, a trust or a partnership, where
the the “natural person” is responsible for managing or overseeing, either
alone or together with other so responsible persons, the activities of the
body, trust or partnership relating to the rendering of any financial service.
Auditor Means an auditor registered in terms of the Auditing Profession Act, 2005
(Act No. 26 of 2005
Compliance Officer Means a compliance officer for an authorised financial services provider
referred to in section 17 (which refers to the compliance officers)
RE5 Training Manual – Updated May 2018 17
Term Definition from the Act
This is the person who embeds compliance within the FSP and reports to the
FSB on compliance issues within the FSP. The Compliance Officer could be
an internal person or an outsourced function.
Client Means a specific person or group of persons, excluding the general public,
who is or may become the subject to whom a financial service is rendered
intentionally, or is the successor in title of such person or the beneficiary of
such service
Support staff These are the staff that supports the function of the operational staff within
the administrative functions of an FSP. If they do not furnish advice or deal
with clients in terms of an intermediary service, they do not have to be FAIS
Fit & Proper
The Registrar
In future to be
called the
Commissioner
The executive officer and deputy executive officer of the Board are
respectively the registrar and deputy registrar of financial services providers
and have the powers and duties provided for by or under this Act or any
other law.
The executive officer referred to in section 1 of the Financial Services Board
Act, 1990 (Act No. 97 of 1990), is the registrar of financial services providers
and has the powers and duties provided for by or under this Act and any
other law.
The deputy executive officer referred to in section 1 of the Financial Services
Board Act, 1990 (Act No. 97 of 1990), is the deputy registrar of financial
services providers.
The deputy registrar of financial service providers exercises the powers and
duties of the registrar of financial services providers to the extent that such
powers and duties have been delegated to the deputy registrar under
section 20 of the Financial Services Board Act, 1990 (Act No. 97 of 1990).
In future, a commissioner and deputy commissioners will make up the
executive committee that will lead the FSCA.
RE5 Training Manual – Updated May 2018 18
Term Definition from the Act
The FSB
(to be replaced by
the FSCA – see
below)
The FSB is a regulatory body within the financial services industry. They are
in essence the “custodians” of the FAIS legislation. They are responsible for
the authorisation process; they ensure compliance and act on aspects of
non-compliance. It also means the Financial Services Board established by
section 2 of the Financial Services Board Act
The FSCA The Financial Services Board (FSB) has officially taken up its new mandate as
the Financial Sector Conduct Authority (FSCA), effective 1 April 2018. This
marks the formal implementation of the Twin Peaks model of financial
sector regulation, as envisaged in the Financial Sector Regulation Act 2017
(FSRA). Finance Minister Nhlanhla Nene, has now signed the
Commencement Notice for the FSRA, formally establishing both the FSCA
and its sister organization, the Prudential Authority (PA).
Authorised FSP’s or
Providers
Means a person who has been granted an authorisation as a financial
services provider by the issue to that person of a licence under section 8
CPD – Continuous
Professional
Development
Means a process of learning and development with the aim of enabling a
financial services provider, key individual, representative or compliance
officer to maintain the competency to comply with this Act
Court Means any court having jurisdiction
Product supplier Means any person who issues a financial product
Publish Means any direct or indirect communication transmitted by any medium, or
any representation or reference written, inscribed, recorded, encoded upon
or embedded within any medium, by means of which a person, other than
the registrar, seeks to bring any information to the attention of any other
person, or all or part of the public
Employed Means that there is a service contract that exists between the employer, FSP
or Product supplier and the representative
Mandate Means any authorization that was given to the representative to act on
behalf of the FSP or Product Supplier. This is usually an agency agreement
that was signed between the FSP and Rep.
RE5 Training Manual – Updated May 2018 19
Term Definition from the Act
DOFA Date of First Appointment
RegistrarvsCommissioner
As stated earlier in this manual, in terms of In terms of the FSRA (Financial Services
Regulation Act, signed into law on the 21st of August 2017) , a commissioner and deputy
commissioners will make up the executive committee that will lead the FSCA.
This means that in future, the Registrar of the FSB/FSCA will be referred to as the
Commissioner of the FSCA.
Due to the fact that the latest Board Notices, as well as the Tasks that the RE5 is based on,
all still refer to the Registrar, we have thought it better to leave the material referring to the
Registrar at this point. Please just note, that when you see the word Commissioner in the
exam, that it would refer to what we currently refer to as the Registrar.
Once all of the changes have finally be implemented, we will update the material
accordingly.
WhatisFinancialServices
Financial services, in terms of the Act, refer to:
• Advice and
• Intermediary Services
TIP: Please note that most professions include a certain amount of administration. Do not
get caught out in the exam when you see administration or administrative services as one of
the options for the Financial Services. It is simple. In terms of the Act, two things and two
things only make up Financial Services. Advice and Intermediary Services ONLY. It is one, or
the other, or both, but nothing but these two!
RE5 Training Manual – Updated May 2018 20
What is Advice
Any recommendation, guidance or proposal
• Of a financial nature furnished
• By any means or medium
• To any client or group of clients regarding
o Purchasing any financial product
o Investing in any financial product
o The conclusion of any other transaction (including a loan or session aimed at
incurring liability OR acquisition of any right or benefit in respect of any
financial product)
o Varying any term or condition (including replacing, terminating or investment
in a financial product)
o Irrespective of whether the advice
§ Is furnished in the course of or incidental to financial planning or
§ Results in purchasing, investing, transacting, varying, replacing or
terminating
What is automated advice Means the furnishing of advice through an electronic medium that uses algorithms and
technology without the direct involvement of a natural person
RE5 Training Manual – Updated May 2018 21
See the illustrations below copied from the INSETA manual to assist you with:
ADVICE:
Make recommendation
Provide guidance Provide proposal
Financial nature
To a client or group of clients
About buying a financial product
About investing in a financial product
About using a financial product in another transaction to cede or pledge or to get benefits or rights in respect of a financial product.
About changes in terms or conditions of financial products • on replacement or • on termination of buying the products or • on termination of investing in the products. It does not matter if the advice was given during or incidental to financial planning with the client OR if it results in buying, investing, transacting, variation, replacement or termination.
RE5 Training Manual – Updated May 2018 22
Advice is not about: Very important to know! See the illustrations below copied from the INSETA manual to assist you with
(Source: INSETA Representative Training Material)
ADVICE IS NOT ABOUT:
Describing a financial product.
Answering routine admin queries.
Giving objective information about a financial product.
Displaying or distributing promotional material.
An analysis or report on a financial report without an express or implied recommendation, guidance or proposal that a transaction in respect of the product meet the client's needs investment objectives or financial situation.
Advice by a board member of any pension fund organisation or friendly society, to their members on benefits to be enjoyed by the members. Advice by the board of trustees of a medical scheme to members of the medical scheme on healthcare benefits.
Advice is not
Procedures to do a financial transaction.
Advice is not factual advice/information
RE5 Training Manual – Updated May 2018 23
What is Intermediary Services?
Any act, other than furnishing of advice
• Performed by a person for or on behalf of a client or product supplier
v Which results in a client entering, or offers to enter into any transaction in
respect of any financial product with a product supplier
v With a view to
§ Buy, sell or otherwise deal in, manage, administer, keep in safe
custody, maintain or service a financial product purchased or invested
in by a client
§ Collect or account from premiums
§ Receive, submit or process client claims against a product supplier
TIP! The best way to remember is that as soon as your job entails the following:
o Technical work
o Clerical work
o Administrative work
o Legal work
o Accounting
o or other services in a subsidiary or subordinate capacity
• Then you DO NOT deliver advice, but you are performing intermediary services
• Be careful, however, as soon as you make a judgement call (i.e. decide to whether to
pay a claim or not), then you are seen as to be a representative and must be
registered. Claims staff could possibly be registered as representatives for
intermediary services only, not giving advice.
See the illustrations on the following page copied from the INSETA manual to assist you with
RE5 Training Manual – Updated May 2018 24
(Source: INSETA Representative Training Material)
Any act, except giving advice by a person
For a client or on behalf of a product supplier
the client entering into or offering to enter into a transaction in respect of a financial product with a product supplier.
Do the following in respect of a financial product purchased by a client from a product supplier or in which a client has invested: • buying, selling or dealing in
(discretionary or not); • managing; • administering; • keeping in safe custody; • maintaining or • servicing
Resulting in With a view to
• collecting or accounting for premiums; • or other money • which a client has to pay to a product
supplier in respect of a financial product.
• receiving; • submitting or • processing the claims of a client against a
product supplier.
OR With a view to
OR With a view to
OR
INTERMEDIARY SERVICE IS
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TheRepresentative
A representative (Rep) is a person who:
• renders financial services (advice and/or intermediary services) to a client
• on behalf of an FSP
A rep must either be employed, or mandated by the FSP to render financial services
• but excludes someone who renders
o Technical
o Clerical
o Administrative
o Legal
o Accounting
o or other services in a subsidiary or subordinate capacity
This service does not require
• Judgment
o Does not lead a client to any specific transaction in respect of a financial
product
Important note:
1. The rep must be employed or mandated and act on behalf of an authorised FSP
(unless the FSP is exempted from the Act). If not employed or mandated by an
authorised FSP and delivering financial services, they will face the FAIS penalties,
which is up to R10 million or 10 years imprisonment or both.
2. If the rep works in a “back office” and does not make judgement calls (settle or
reject a claim), they will NOT be required to be registered as a rep. BUT if they make
judgement calls, they will be required to be fit & proper as they need to be
registered as a representative.
3. Mandate refers to that there is an “agency agreement / agreement” to act on behalf
RE5 Training Manual – Updated May 2018 26
of the supplier, FSP etc.
If a Rep was acting as a Rep (mandatory or employed) on behalf of an FSP on the date that
the FSP is registered by the FSB (now the FSCA) as an authorised FSP, that person will be
regarded as a Rep
Appointment of representatives An FSP must ensure that where it appoints a (natural) person as a representative as a:
• That the person:
o has not been declared insolvent or provisionally insolvent
o has not been placed under liquidation, provisional liquidation or business
rescue; and
o is not subject to any pending proceedings which may lead to an outcome
above
Please note, in the 2008 Fit & Proper requirements, it has not been necessary for KI’s or
Reps to be financially sound, however, with the April 2018 updates, the above now apply.
Therefore, financial soundness again is now part of the Fit & Proper for Reps, but only
insofar it applies to Reps, which applies to the above only.
• And if a JURISTIC Representative is appointed (not a natural person, i.e. a company),
that:
• sufficient operational ability and financial resources to perform the activities
for which it is appointed as a representative; and such appointment does not:
§ materially increase any risk to the FSP or to the fair treatment
of its clients;
§ materially impair the quality of the governance framework of
the FSP, including the FSP’s ability to manage its risks and
meet its legal and regulatory obligations;
§ compromise the fair treatment of or continuous and
satisfactory service to clients;
§ prevent the FSP from acting in the best interests of its clients;
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§ result in key decision-making responsibilities being removed
from the FSP
Remuneration or fee must be;
• Reasonable and commensurate with actual activities
• May not increase risk of TCF
An FSP must have contingency plans to ensure continued function and service on the event
that a rep is terminated
An FSP may not allow a rep to outsource or sub-delegate an activity relating to any services
the rep performs on its behalf.
A rep must have the operational ability to carry out their functions
A Juristic representative must have a KI responsible for overseeing their services
Entry level requirement for Reps
When a representative is appointed, they must have a recognised qualification as per the
Board Notice applicable to the Product Categories they will be registered for.
UNLESS – The rep has an entry level qualification and will work under SUPERVISION until
the qualification is obtained (a maximum period of 6 years from first date of appointment at
the FSB (now the FSCA) as a representative)
The following entry-level qualifications will be accepted: • Matric, or
• Grade 12, or
• An appropriate certificate at NQF Level 4
Reps working under subcategories 1.1 (Long Term Cat A – Assistance Business) & 1.19
(Friendly Society Benefits) must have the following:
• ABET Level 1 (Grade 3 / Standard 1)
• Or (not and) the proven ability to read, write and calculate to the satisfaction of the
FSP
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Recruiting Reps
Recruitment checks need to include:
1. Entry level qualification
2. Class of business training (if not completed, must be done before advice is given)
3. Product specific training (if not completed, must be done before advice is given)
4. Experience
5. Relevant recognised qualification
6. Regulatory exams (also referred to as examinations determined by the registrar)
7. Honesty, integrity & good standing
8. Whether the person has been debarred
9. Financial soundness as it relates to representatives (not insolvent, not under
liquidation or business rescue)
10. Operational ability as it related to representatives
To be registered as a Health Schemes Representative, a person must be accredited by the
Council of Medical Schemes as a broker or, if working under supervision, an apprentice
broker.
If the Rep does not meet the following requirements, they can be employed, but need to
work under supervision:
• Experience
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• Relevant recognised qualification
• Regulatory exams (also referred to as examinations determined by the Registrar)
Class of Business Training and Product Training must be completed BEFORE they are
allowed to render advice, even if advice will be rendered under supervision.
Recruitment decisions need to be made very carefully or declined if evidence of the
following turned up:
• Compromised honesty, integrity and good standing
• Person has been debarred
FSP’s and Key Individuals need to confirm that there are enough role-players, either KI’s or
Reps that meet the criteria and can act as supervisors.
Supervision of Reps
What does it mean when a rep works under supervision It means that the rep is rendering services under guidance, instruction and supervision
Selection of Supervisor FSP must ensure that there is a normal working relationship between the Supervisor and
Supervisee to allow the Supervisor to oversee the activities of the Supervisee
• There must be regular contact to enable
o Transfer of skills
§ Which could include face to face and / or
§ Contact via electronic means
Supervision agreement • Must be a written agreement detailing procedure regarding rendering services under
supervision
Supervisor responsibilities
• FSP to ensure that supervisees are supervised at all times when executing duties
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• Supervisor to ensure that supervisee has a good understanding and exposure to the
Categories & Subcategories providing services in
• Supervisor must observe selected meetings between the supervisee and customers
• The frequency will depend on
o Complexity of service provided
o Complexity of products offered
o Experience of supervisee
o Qualifications of supervisee
• FSP must ensure that supervisor is able to provide evidence of supervision (available
to Registrar if requested)
• Supervisor must review the Record of Advice and assess the advice given
• Supervisor and supervisee must have properly documented evidence of supervision
o Method followed
o Frequency thereof
If working under supervision, the representative is responsible for the following:
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Representative under supervision (supervisee)’s responsibilities
• Adhere to requirements of the supervision contract
• Provide the supervisor with records and documents regarding financial services
provided
• Disclose to clients that s/he is acting under supervision
• Undertake the relevant product training, complete the qualification in the period
provided and
• Request guidance from the supervisor when in doubt
The requirements of a Rep
• The rep must provide certified proof (certified by the FSP) that an employment or
mandate agreement exists (service contract)
• This certified proof must also include that the FSP will accept responsibility for the
Rep (Section 13 certificate)
• Rep cannot act if s/he is debarred
o When debarred, a Rep can only be reappointed if s/he meets all of the
requirements to be reinstated (please refer to the debarment and
reinstatement of representatives)
• Rep may not render financial services on behalf of any person who is not an
authorised FSP (unless the FSP is exempted from the Act)
• Must be Fit & Proper (Competence, Good Standing, Honesty & Integrity and
Financially Sound with Operational Ability insofar as it applies to a Representative)
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• May work under supervision, whilst obtaining the relevant competence
requirements (but must disclose to clients that he/she is working under supervision,
and remember, Class of Business Training & Product Specific Training must be
completed PRIOR to giving of advice, even if under supervision)
• Must comply with the FAIS Act and any other relevant laws
o Important to note here that a Rep does not only have to adhere to the
regulations as set out by FAIS, but they all need to adhere any other law that
is applicable to them (Consumer Protection Act, POPI, FICA, OHSA etc…)
The roles and responsibilities of a Rep In terms of the General Code of Conduct
• Act honestly and fairly, and with due skill, care and diligence in the interest of clients
• Information provided must be:
o Factually correct
o Provided in plain language
o Must be adequate and appropriate, taking into consideration the level of
knowledge of the client
o Must be provided timeously to afford the client to make an informed
decision
• Have and effectively use the resources, appropriate technological systems and
processes to properly perform their activities professionally
• Obtain the necessary information (known as a Financial Needs Analysis - FNA),
which includes:
o Financial Product Experience (what does the client know and what products
did they have, if any) - their past
o Financial Situation (what is their current financial situation, which products
do they have, if any – their present situation, and
o Their objectives in connection with the financial service required (what they
want, what their needs are) – the future
• Treat clients fairly in a situation of conflicting interest
• Comply with all applicable statutory and common law requirements
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The purpose of the Code of Conduct is to ensure that Clients are able to make informed
decisions and that their financial needs will be satisfied appropriately and suitably
The Code of Conduct must make provision for (each of these will be discussed later on in
detail)
• Making adequate disclosures of relevant information, including own interests (actual
or potential)
• Keeping adequate and appropriate records
• Avoiding fraudulent and misleading advertising
• Keeping documents and funds from clients safe and separate
• Suitable guarantees, Professional Indemnity cover or Fidelity Insurance
• Controlling, or prohibiting incentives given, or accepted, by the Provider
• Any other matter which is necessary or expedient to be regulated to better achieve
the objects of the Act
Other codes of conduct may be drafted for different financial products. Currently, over and
above the GCoC, there are four other Codes of Conduct.
When a Rep provides advice
Steps to be taken when providing advice to the client:
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A provider (except a direct marketer), PRIOR to providing advice to a client, must:
• Take reasonable steps to seek from clients appropriate and available information
regarding the client’s
o Financial situation
o Financial product experience
o Objectives
§ In other words, conduct a detailed FNA
• To enable the provider to provide the client with appropriate advice
• Identify the financial product or products that will be appropriate to the client’s risk
profile and financial needs
• Make adequate disclosures
• Take all reasonable steps to ensure that the client understands the advice, and is
able to make an informed decision
• Keep a record of advice (ROA)
• When replacing another product wholly or partially (when a client adds another risk
on cover, or when a client accepts a new policy), fully disclose to the client the
o Actual and potential financial implications
o Costs and consequences of the replacements
o Including, details of:
§ Fees and charges
§ Terms and conditions
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§ Exclusions of liabilities
§ Waiting periods
§ Loadings
§ Penalties
§ Excesses
§ Restrictions or circumstances in which benefits will not be provided
§ In case of an insurance product, impact of age and health changes on
the premium payable
§ Differences between tax implications
§ Material differences between investment risk
§ Penalties or unrecovered expenses deductible or payable due to
termination
§ To what extent the replacement product is readily realisable
§ Vested rights, minimum guaranteed benefits or other guarantees or
benefits which will be lost
• When the advice is to replace a long term insurance contract, the issuer of the
current policy, must be notified
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When a client receives advice from a rep
Incomplete or no FNA
• Where the client has not provided all the information requested, or the rep has not
been able to conduct the analysis (the client did not want to complete the FNA)
• The rep or provider must inform the client and ensure that the client clearly
understands that
o A full analysis (FNA) could not be undertaken
o There may be limitations on the appropriateness of the advice
o Client should take care to consider whether the advice is appropriate
Choosing a different product If the client chooses another product that differs from which has been recommended to the
client, the rep or provider must inform the client
• As soon as reasonably possible
• Of the clear existence of any risk to the client
• And advise the client to take care to consider whether the product is appropriate to
the client’s needs, objectives and circumstances
The Fit & Proper Requirements that apply to Representatives Please note that the Fit & proper requirements are ongoing – i.e. must be complied with
at all times, it is not a once off event or occurrence
• Honesty, Integrity & Good Standing
• Competence
o Experience (differs depending on product category, but in most cases 1 year
from DOFA)
o Qualification (within 6 years from DOFA, cut-off 30 June)
o Regulatory Exams (within 2 years from DOFA)
o Class of business training & Product specific training
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o CPD
• Operational Ability (in so far as it applies to representatives)
• Financial Soundness (in so far as it applies to representatives)
(remember – DOFA is Date Of First Appointment with the FSB (now the FSCA) as a Rep/KI)
What does Honesty and Integrity refer to?
• All FSP’s, KI’s and Reps must have honesty and integrity
• A person referred to as per above must be a person who:
o Honest and has integrity, and
o Of good standing
• When the Registrar determines whether a person adheres to the requirements of
Honesty and Integrity, the Registrar may refer to any information in possession of
the Registrar or brought to the Registrar’s attention
What does it mean when a person needs to be of good standing There are several aspects (prima facie evidence) that would be evidence that a person is not
in good standing. The time that has passed and circumstances could be considered, but is
not limited to:
• Any previous judgements that has not been rescinded (withdrawn), includes criminal
(found guilty) and civil matters (found liable)
o Includes, but is not limited to:
o Theft, fraud, forgery, uttering a forged document, perjury or an offence
involving dishonesty, breach of fiduciary duty, misrepresentation, or
negligent, dishonourable or unprofessional conduct
o An offence under a law relating to the regulation or supervision of a financial
institution as defined as a Financial Institution or a corresponding offence
under the law of a foreign country
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o An offense under the Prevention of Corruption Act, Corruption Act or the
Prevention and Combating of Corruption Activities Act, or a corresponding
offence under the law of a foreign country.
• Lack of compliance with Regulatory deadlines, been the subject if frequent
regulatory actions (frequent or material preventative, remedial or enforcement
actions by the Registrar or a regulatory authority)
• Demonstrated lack of willingness to comply with legal, regulatory or professional
requirements
• Refusal or withdrawal of membership of professional bodies
• Offences relating to financial institutions
• Been disciplined by a professional or regulatory body
• Has been removed from an office of trust for theft, fraud, forgery, uttering a forged
document, misrepresentation, dishonesty, breach of fiduciary duty or business
conduct
• Has breached a fiduciary duty
• Has been suspended, dismissed or disqualified from acting as a director, managing
executive, public officer, auditor or statutory actuary (or his or her alternate) under
any law or any action to achieve one of the above-mentioned outcomes has been
instituted against the person,
• Has been refused a registration, approval, authorization or license to carry out a
trade, business or profession, or has had that registration, approval, authorization or
license suspended, revoked, withdrawn or terminated by a regulatory authority
• Has been denied membership of any professional body or has had that registration
or membership revoked, withdrawn or terminated by a professional body because of
matters relating to honesty, integrity or business conduct
• Has been disciplined, reprimanded, disqualified, or removed in relation to matters
relating to honesty, integrity, incompetence or business conduct by a
o Professional body
o Regulatory authority
o Or any action to achieve one of the aforementioned outcomes has been
instituted against the person
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• Has knowingly been untruthful or provided false or misleading information to, or
been uncooperative in any dealing with the Registrar or a regulatory authority
• Has demonstrated a lack of readiness and willingness to comply with legal,
regulatory or professional requirements and standards
• Has been found not to be fit and proper by the Registrar or a regulatory authority in
any previous assessments of fitness and propriety and the reason for being found
not fit and proper have not been remedied
• Has been involved or is involved as a director, trustee, member, partner, controlling
shareholder or managing executive, or is concerned in the management, of a
business that has been:
o The subject of any matter referred to above
o Placed in liquidation or business rescue
o Whilst that person has been connected with that organization or within one
year of that connection, or
• Has failed to disclose information required to be disclosed in terms of the Act,
including a failure to disclose information relating to honesty, integrity and good
standing
The Registrar must, in assessing whether a person meet the requirements have due regard to: • The seriousness of a person’s conduct, whether by commission or omission, or
behaviour and surrounding circumstances that has or could potentially have a
negative impact on a person’s compliance with honesty, integrity, and of good
standing
• The relevance of such conduct or behaviour that has or could potentially have a
negative impact on the person’s compliance with honesty, integrity, and good
standing, to the duties that are or are to be performed and the responsibilities that
are or are to be assumed by that person
• The passage of time since the occurrence of the conduct or behaviour that had a
negative impact on the person’s compliance with honesty, integrity, and good
standing
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Disclosure of information to honesty, integrity, and good standing
• An FSP and Key Individual must disclose to the Registrar,
• and a representative must disclose to its FSP,
o promptly and on own initiative,
o fully and accurately,
o all information, not limited to information in relation to matters referred to
above (incidents when a person lack honesty, integrity, and good standing)
o which may be relevant in determining whether a person complies or
continues to comply with the requirements relating to honesty, integrity, and
good standing.
COMPETENCE:
Competence must be maintained on an ongoing basis and consists of;
• Skills, knowledge and expertise
• Comply with Experience, Qualifications. RE exams, Class of Business Training,
Product Specific Training and CPD
Recognised Qualifications • The registrar will publish a list of recognised qualifications on the official website,
where anyone will be able to check if their qualification will be recognised by the FSB
(now the FSCA) .
• The Registrar, on application or on own initiative may recognise a qualification as
appropriate for:
o each of the categories of FSPs;
o representatives of FSPs in each of the categories of FSPs;
o key individuals in each of the categories of FSPs
o different types of financial services and financial products.
Important Note:
RE5 Training Manual – Updated May 2018 41
• Qualification needs to be obtained within 6 years from DOFA, no later than the 30th
of June of the sixth year. This means that if you were appointed on 1 June 2010,
then you need to achieve your qualification before or on 30 June 2016. If you were
appointed on 01 January 2010, then your cut-off date will be 30 June 2016.
o However, if you were appointed on the 1st of August 2010, then your six
years expire at the end of July 2016. However, due to the FSB (now the FSCA)
deadline always being on the 30th of June following your respective date, the
FSB (now the FSCA) deadline will then be 30 June 2017.
Minimum Qualifications:
Does NOT apply to;
Cat I FSP, KI’s or reps working only with
• Long Term Insurance subcategory A
• Friendly Society benefits
Reps working only with;
• Cat I Execution of Sales
Provided that ;
Execution of sales;
Reps working only with execution of sales must have;
• Grade 12 or equivalent
Requirements
• The execution of sales is only by script
• There is direct oversight of a KI
• All calls are recorded
• There are controls to ensure no advice given
• Process will not result in unfair outcomes
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• Recordings are reviewed on a regular basis
• Monitored to ensure no deviation
• Reviews adequacy of controls from script
• Reviews script for appropriateness and compliance
Regulatory Examinations Applies to all FSPs, KIs and Reps, except;
Does not apply to;
Cat I FSP, KI’s reps working only with
• Long Term Insurance sub-category A
• Friendly Society benefits
Reps working only with
• Execution of Sales for CAT I Tier 1 reps
• CAT I reps rendering financial services for Tier 2 financial products
Representatives have 2 years from their DOFA date to pass the 1st level regulatory exam
(RE5)
Table A
Column A
Category I
Column B
Category II
Column C
Category IIA
Column D
Category III
Column E
Category IV
FSP RE 1 RE 1 & RE 3 RE 1 & RE 3 RE 1 & RE 4 RE 1
Key Individual RE 1 RE 1 & RE 3 RE 1 & RE 3 RE 1 & RE 4 RE 1
Representative RE 5 RE 5 RE 5 RE 5 RE 5
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CLASS OF BUSINESS and PRODUCT SPECIFIC TRAINING
Applies to all FSPs, KIs and Reps
Except;
Cat I FSP, KI’s reps working only with
• Long Term Insurance sub-category A
• Friendly Society benefits
Reps working only with
• Execution of Sales for Cat I Tier 1 reps
• Cat I reps rendering financial services for Tier 2 financial products
Product specific training does not apply to
• Cat II, CAT IIA, Cat III FSP or its reps
• KI’s for all Cats provided they comply with sec 12 – General Competence
requirements
Class of business training applies to KI’s only for the classes of business they are actually
registered for.
BEFORE rendering any financial service, an FSP and Rep must complete Class of Business and
Product Specific training for the products they are authorised to render services .
A KI must have completed the Class of Business and Product Specific training for training
before overseeing or managing the relevant product
An FSP must ensure its KI and Reps are proficient, and have completed training in, their
particular products
Class of Business training to include ;
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• Range of products
• General; characteristics, terms, features
• Typical fee structures, charges and other costs
• General risks
• Investment and risk principles
• Appropriateness of product
• Typical role players and markets
• Impact of legislation incl. tax
• Impact of environmental and economic factors
• Inter-relationship between classes of business
• Industry standards and relevant codes of conduct
Product Specific training to include; • Characteristics, terms and features
• Any specific complexities
• Material differentiation
• Nature and complexity or any underlying component
• How the underlying components are structured and priced
• Fee structure, charges and any other costs
• Nature of any guarantee
• Risks
• Tax impact
• Potential impact of abnormal market conditions
• Investment strategies
• Flexible benefit or service options
• Accessibility of benefits or funds
• Level of liquidity of product and underlying components
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• Intended target market
• Identity of product supplier and intended outcomes delivery
• Identity of product suppliers and providers of underlying components
• Particular disclosures, prescribed or not
• Lock-in periods and relevant termination conditions
• Expected outcomes for clients
Class of Business training may be separate or with;
• Product Specific training
Or
• Recognised qualification
Where a financial product incorporates one or more other underlying financial products, the
training and assessment referred to above must include class of business and product
specific training in respect of the underlying products and the class or classes of business in
which the underlying product falls.
Record keeping and reporting requirements of training
• Training must be recorded within 15 days of the Class of Business or Product Specific
training
• Records must be kept in the competence register for at least 5 years after;
o KI has ceased to oversee or manage that product
o FSP, Rep have ceased to render services for that product
• Must be able to provide the confirmation to
o product supplier
o former KI, or Rep
within a reasonable time
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CPD
Applies to all FSPs, KIs and Reps and comes into effect from 1 June 2018
Except for those working only with;
• Long Term Insurance Subcategory A
• Friendly Society Benefits
• Cat I reps rendering financial services for Tier 2 financial products
• Cat 1 reps rendering Tier 1 intermediary services
A KI, Representative and FSP must comply with the CPD requirements
The CPD Activities undertaken must; • Be relevant and appropriate to what they work with
• Contribute to their knowledge , skill, ethical standards, expertise
• Address identified needs or gaps in knowledge, generic understanding of product
and laws
• Takes into account changing conditions relevant to product
• An FSP must establish procedures and policies that ensure how the FSP, KI and reps
will maintain, update and develop new, relevant knowledge
• Plans must be implemented for each CPD cycle to obtain the requirement
Record keeping and reporting requirements of CPD
KI & Reps to supply the FSP, within 15 days of expiry of each CPD cycle,
• With evidence of CPD activities completed
FSP must, within 30 days of expiry of each cycle,
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• record the activities of the FSP, KI and reps in the competency register
• record the dates of CPD activities completed
• Note any reductions (if absent due to maternity, paternity or adoption leave; long
term disability or illness or absence due to caring for a loved one with a long term
illness or disability)
o Reduction due to the above only allowed for 3 consecutive CPD cycles
• Obtain relevant supporting evidence
• Retain the evidence for at least five years after every cycle
Recognised CPD Activities:
• MUST be accredited and tracked by a Professional Body, recognised by SAQA
CPD Cycles The CPD Cycle refers to a period of 12 months, commencing from 01 June and ending 31
May in the following year
Minimum CPD hours FSP’s, Representatives and KI’s must complete the following number of hours of CPD
activities relevant and appropriate to their class(es) of product categories
• Single sub-class of business within single class of business = 6 hours
• More than one sub-class of business within a single class of business = 12 hours
• More than one class of business = 18 hours
A KI, rep or FSP authorised or appointed for less than 12 months may pro rate their hours
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Experience requirements for Reps Experience must meet specific financial product and particular category requirements
• Category I Reps must meet the minimum experience applicable to the subcategories
• The experience must be practical experience gained in the rendering of financial
services in respect of Category I and the subcategories concerned.
• The practical experience must
o Have involved the active and ongoing gaining of knowledge, skills and
expertise required by the Act
o The experience must have been obtained through the active involvement in
the rendering of Financial Services
o This experience could have been gained under supervision
o The experience could have been gained in or outside the RSA
o The experience gained lapses when the FSP or rep has NOT rendered the
applicable financial service for 5 consecutive years
o The experience could have been gained simultaneously in multiple
subcategories
§ Provided that proof can be provided
Experience applies to all FSP’s, KI’s and Reps
Experience lapses for an FSP, KI or rep if particular service for particular financial product
not worked with for 5 years
Operational requirements for Reps
• A representative of an FSP must have the operational ability to effectively function
as a representative of the FSP for which that person was appointed.
Representative Register
An FSP must:
• Maintain a register of representatives and key individuals of the representatives
• Which must regularly be updated and available to the registrar
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• When the FSP changes their authorised products with respect to Short Term
Personal Lines A1, Long-Term Insurance B1A & Long-Term Insurance B2A, the FSP
must update the Rep Register with these new subcategories of products within 3
months– This is due to the additional sub-categories of products introduced on 1
April 2018
What information must be contained in the Representative Register?
Contain the Rep and KI’s:
• Name
• Business address
• Whether the Rep is employed by the FSP, or acts mandatory
• The categories in which the Rep is competent to render financial services
• Whether the Rep is working under supervision
What is the purpose of the Rep Register? In order for the Registrar to have a:
• Maintained
• And continuously updated
• Central register of all representatives and key individuals
The Registrar may publish the Rep Register in any appropriate media
The Key Individual needs to verify that the FSP maintains a register of Reps in accordance
with the FAIS requirements
Debarring a Representative
When the FSP debars a Rep The FSP needs to ensure that any Rep who no longer complies with the qualification and
licensing requirements, or contravened or failed to comply with the Act:
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• Is prohibited from rendering service
• By withdrawing authority to act on behalf of the FSP (which means debarment)
• The Rep’s name (and that of the Representative’s KI) must be removed from the Rep
Register
• The FSP must ensure that the debarment does not prejudice the interest of any
clients
• All un-concluded business must properly be concluded
• The FSP must share the information with the Registrar regarding the conduct or
reason for debarment of the rep
o This information must be supplied to the Registrar in writing
o The Registrar may publish in the appropriate media
• The FSP must update the rep register within 15 days after the removal of the names
from the register
When the Registrar debars a Rep The Registrar may debar a Rep on the basis of available facts and information that the
person:
• Does not meet, or no longer meets, the requirements to be licensed
• Has contravened, or failed to comply with the Act
Process to be followed when the Registrar debars a Rep
• Name of debarred person is then placed on the central register of debarred persons
• Person’s name is flagged on the FSB’s (now the FSCA) website for public viewing
• Period of debarment depends on the severity of the transgression, usually between
2 – 5 years
• If the person is an FSP, regulatory action will ensue
• Inform the FSP to update the rep register within 5 days
• If the debarred person is linked to other FSP’s, the Registrar will inform the other
provider to remove the name of the person from its register within 15 days
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Right of appeal Any person who feels aggrieved by any decision by the
• Registrar or
• Ombudsman
May appeal to the Board of Appeal (FSB Board of Appeal)
The FSB Board of Appeal will from now on be known as the Financial Sector
Tribunal (effective 1 April 2018)
Process of Appeal
• An appeal must be lodged within 30 days becoming aware of the decision
• In the manner prescribed by the Minister
• Fees must be paid prescribed by the Minister
• The appeal lodged does not suspend any decision pending the outcome of appeal
§ Unless the chairperson or deputy chairperson directs otherwise
Reappointment of debarred reps On the date of reappointment, the applicant must comply with the following:
• A period of at least 12 months since the debarment date must have elapsed
o Unless the debarment was due to the fact that the Rep was not Competent in
terms of the Fit & Proper requirements.
§ In this instance, the Rep can be reappointed as soon as the
Competence requirements have been met
• All un-concluded business has been properly concluded
o All complaints or legal proceedings or
o Other administrative or legal proceedings
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o Arising out of any acts or omissions have been properly resolved or
concluded
• All fit & proper requirements are complied with
• FSP must ensure that all requirements for the reappointment of a debarred rep is
complied with as determined by the registrar and published in the Gazette or official
website or other appropriate media
KeyIndividuals
A Key Individual is someone who
• Is a natural person (cannot be a juristic person)
• Who manages or oversees the activities of the FSP (financial services)
• A KI can be a sole proprietor
Responsibilities of a KI
• Must be able to have (implement) and maintain the operational ability of the FSP
• To fulfil the responsibilities imposed by the Act
• Which includes overseeing the activities of the FSP (rendering of financial services)
• A KI must have the operational ability to carry out their functions
o This must be able to be demonstrated in the form and manner to be
determined by the Registrar
o The FSP must regularly assess the operational ability of the KI to adequately
and effectively carry out their functions taking into account the scale, range
and complexity of the business.
o Taking into account whether they are reps or KI’s of any other FSP
• A juristic representative must at all times have at least one key individual responsible
for managing or overseeing the financial services rendered by the representative.
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Fit and Proper Requirements that apply to KI’s
All Fit & Proper requirements that relate to Reps, also relate to Key Individuals. Over and
above that, KI’s need the following –
Qualification requirements
• If the FSP is a Sole Proprietor
o In respect of Category I or IV
o S/he must have a recognised qualification applicable to the categories or
subcategories that it is authorised for
• A KI of a Category I FSP
o Must at approval have
o A recognised qualification applicable to the categories or subcategories that
it is authorised for
Please note!
A Rep may be appointed under supervision while they complete their qualification. A KI will
not be approved by the FSB (now the FSCA) unless they already have an appropriate
recognised qualification
Experience requirements relating to KI’s This is over and above the experience requirements as detailed under Fit & Proper for Reps
• KI’s must have at least 1 year’s practical experience managing or overseeing
activities of the business (or a part thereof)
• Provided that the experience:
o Could have been gained in or outside the RSA
o May have been gained in the management or oversight of services similar to,
or corresponding to the financial services rendered by the FSP
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• The experience gained by a KI lapses when the KI has not managed or overseen the
rendering of a particular financial service in respect of a particular category of FSP
for a period of 5 consecutive years
Management Responsibilities of the KI An FSP must be able to maintain the operational ability to fulfil the responsibilities imposed
by the Act, including but not limited to:
• A fixed business address
• Adequate access to communication facilities including (at least)
o A fulltime telephone or cell phone service
o Typing and document duplication facilities
• Adequate storage and filing systems
o For safe keeping of records
o Business communication
o And correspondence
• An account with a registered bank
o And where required, a separate bank account for client funds
• Where the FSP is an accountable institutions in terms of FICA
o It must have all of the procedures, systems and policies in place to comply
with the that Act and other applicable anti-money laundering or terrorist
financing legislation
If an FSP uses a 3rd party to render administrative or system functions in relation to the
rendering of financial services on its behalf,
• There must be a service level agreement in place, specifying
o Agreed services
o Time standards
o Roles and responsibilities
o Any applicable penalties
• An FSP must ensure that internal control structures, procedures and controls are in
place which at least includes the following:
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o Segregating duties, roles and responsibilities from an operational risk
mitigation perspective
o Applying logical access security
o Access rights and data security on electronic data
o Physical security of the FSP’s assets and records
o Documentation relating to business processes, policies and controls
o System application testing
o Disaster recovery and back-up procedures
o Training for Reps and KI’s on the Act and rendering financial services / giving
advice
o A business continuity plan
• An FSP must ensure that the necessary system controls and compliance measures
are in place to manage and monitor systems in use
• An FSP must record all financial and system procedures to ensure that the FSP is able
to report in terms of applicable accounting requirements
• An FSP must have general administration processing, accounting transactions and
risk control measurements in place to ensure accurate, complete and timeous
processing of data, information reporting and the assurance of data integrity
• The FSP must maintain in force suitable guarantees or professional indemnity
insurance or fidelity insurance cover to cover the risks of losses due to fraud,
dishonesty or negligence
• The KI, in respect of the FSP, must have and be able to maintain the operational
ability to fulfil the responsibilities imposed by the Act, including overseeing the
financial services provided by the Reps
The Key Individual needs to verify that the FSP maintains a register of Reps in accordance
with the FAIS requirements
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TheFinancialServicesProvider
Responsibilities of the FSP
An FSP must ensure that:
• All KI’s and Reps are competent to act, and
• Comply with
o Fit & Proper requirements
o Any other requirements contemplated
• That Reps comply with the Code of Conduct & any other applicable laws regulating
business conduct
• That KI’s and Reps are trained on the requirements of the Act
• KI’s and Reps are trained on the giving of advice and/or rendering of intermediary
services
• Need to implement and maintain a competence register
• Establish policies, monitoring and controls to comply with Competence requirements
• Adhere to CPD requirements
• Assess whether products are appropriate for existing competence and skills
• Ensure that staff who are not competent do not render financial services
Establish evaluation and review records of;
• KI’s and reps ability to meet requirements
• Training records
• CPD records
Records to include evaluation of;
• Technical knowledge
• Skills and expertise
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• Changes in financial markets, products and legislation
Competence register to be compiled for reps and KI of;
• Qualifications
• RE exams
• Product specific training
• Class of Business training
• CPD
Provide records to the Registrar in format prescribed
The requirements prescribed are minimum requirements
Fit & Proper Requirements that apply to FSP’s
All Fit & Proper requirements that relate to Reps and Key Individuals, also apply to FSP’s.
Over and above that, FSP’s need the following –
Operational Ability • A key individual must have the operational ability to effectively manage and oversee
the financial services related activities of the FSP or juristic representative and the
financial services in relation to the financial product for which the key individual was
approved or appointed
• A key individual, must be able to demonstrate to the Registrar, in a form and manner
which may be determined by the Registrar, that he or she has the required
operational ability to effectively and adequately manage or oversee the financial
services related activities of all the FSP’s or juristic representatives for which the key
individual was approved or appointed, where he or she is
o approved or appointed as a key individual of more than one FSP or juristic
representative; or
o approved or appointed as a key individual of an FSP or juristic representative
and appointed as a representative of an FSP other than the first mentioned
FSP,
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• An FSP must, on a regular basis, assess the operational ability of its key individuals to
adequately and effectively perform their functions taking into account individual
circumstances, the nature, scale, range and complexity of the FSP’s financial services
related activities and whether the key individuals are approved as key individuals or
appointed as representatives of mother FSPs
Financial Soundness The fit and proper requirements relating to financial soundness apply to:
• All FSPs; and
• Juristic representatives
Financial Soundness does not apply to
• Key individuals
• Representatives that is a natural person; and
• An FSP who is a registered Bank as defined in the Banks Act, or a registered insurer
as defined in sections 1 of the Short-term Insurance Act and Long-term Insurance
Act, provided that the FSP complies with the financial soundness requirements
prescribed by those Acts
o Apart from the aspects mentioned on page 27
General requirements of Financial Soundness • An FSP and a juristic representative must at all times maintain financial resources
that are adequate both as to amount and quality to carry out their activities and
supervisory arrangements and to ensure that there is no risk that its liabilities cannot
be met as they fall due
• The assets of the FSP and a juristic representative must at all times exceed the
liabilities of the FSP and juristic representative respectively.
• An FSP, other than a Category I FSP that does not hold or receive monies in respect
of a financial product, and a juristic representative of such FSP must have sound,
effective and comprehensive strategies, processes and systems to assess and
maintain, on an ongoing basis, the amounts, types and distribution of financial
resources that it considers adequate to cover:
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o the nature and level of the risks to which it is, or might be, exposed;
o the risk that the FSP or juristic representative might not be able to meet the
obligations of financial soundness in the future.
• No person may become or continue as an FSP or juristic representative if
o declared insolvent or provisionally insolvent
o placed under liquidation or provisional liquidation
• No person may become an FSP or a juristic representative if business rescue
proceedings have commenced
Application requirements to become an FSP Please note:
• FSP’s apply to the FSB (now the FSCA) for a license • Key Individuals apply to the FSB (now the FSCA) to be appointed as Key Individuals • The manner of an KI applying to the FSB (now the FSCA) is similar as that of an FSP
applying for a licence • When a KI is added or replaced, they (the FSP) need to apply to the FSB (now the
FSCA) for a new KI to be added • Reps are not appointed by the FSB(now the FSCA) , they are appointed and approved
by the FSP according the provisions in the Act. However, the FSB (Registrar) may debar a Rep, although the FSP appointed them
• An application for an authorisation by the FSP must be submitted to the Registrar
• The information that needs to be supplied to satisfy the Registrar that the applicant
complies with the requirements for fit and proper, will include:
1. The applicant's financial soundness
2. Personal character qualities of honesty and integrity and good standing
3. Operational ability of the applicant to fulfil the responsibilities imposed by
this Act; and
4. Competence requirements
• The applicant must, in addition, also satisfy the Registrar that any Key Individual in
respect of the applicant is Fit & Proper and can fulfil the responsibilities of an KI as
prescribed in the Act
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• The Registrar may require additional information from the Applicant
o Require information to be verified
o Take other info into consideration regarding the applicant
o From any source, including the
§ Ombud
§ Any regulatory or supervisory authority
• Info obtained must be disclosed to the applicant
• Applicant must be given reasonable opportunity to respond
• Registrar then
o Grants the application if satisfied that applicant complies with the Act
o or
o Refuses the application if not satisfied
§ If the application is refused:
• Notify the applicant
• Give reasons for the refusal
Changes that must be reported to the FSB (now the FSCA)
• Reporting changes in the FSP
o Changes to Directors or Members for instance
• Reporting changes regarding KI’s
• Submitting a Rep register
o Changes in Reps or qualification details
• Reporting a change of business name and financial year end if granted by another
authority such as
o Type of business – CC, Sole Proprietor, Company or Partnership
o Change the name of the business or trading name of the business or nominee
company
o Business contact details
o Contact person at the FSP
o Financial year end (if authorised by another authority)
o Banking details
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o Change in shareholders
o Change in auditor or compliance officer
• Changes to financial products
o Change in foreign clearing firm or foreign forex service provider involved
WITHIN 15 DAYS
Licenses granted by the Registrar
• A Sole Proprietor FSP must meet the
o minimum experience and all
o applicable qualification requirements and
o must have completed the relevant RE’s
§ as required for an FSP and KI per Category & subcategory
o BEFORE a license will be granted
• If granted, the Registrar will issue to the applicant
o A license to act as an authorised FSP
o Number of certified copies as required by applicant
• If a provider is granted accreditation under the Medical Schemes Act, it must be
granted authority to act as an authorised FSP
• The Registrar must be satisfied that the FSP and KI are Fit & Proper
• Any authorised FSP and KI are subject to the provisions in the Act
Medical Schemes Act • If a license is
o Refused
o Suspended
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o Withdrawn
o Lapses
By the Registrar (FSB (now the FSCA)), it is deemed to have been refused, suspended,
withdrawn or lapsed in terms of the Medical Schemes Act, and visa versa
After granting the license, the Registrar may:
• Withdraw or amend any condition
o As long as notice is given to licensee
o Clients will not be prejudiced
• Impose new conditions
o When a new KI is appointed
o KI’s personal circumstances change
• Registrar may direct an FSP or Rep to furnish the Registrar with information and
documents as required
Displaying and disclosing the FSP License The licensee must
• Display a certified (what) copy of the license in a prominent and durable (how)
manner within (where) every business premises of the licensee
• Disclose the fact that the license is held in all business documentation,
advertisements and other promotional material
• Provide a copy of the license to any person requesting proof of licensed status
• The license may not be used when it has been
o Suspended (provisionally or final)
o Withdrawn
o Lapsed
Responsibilities of the FSP to ensure the KI’s Fit and Proper Status
The FSP must
• Be satisfied that every director, member, trustee or partner who is not a KI, is honest
and has integrity (personal character requirements)
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• Inform the Registrar within 15 days of the appointment of a new director, member,
trustee or partner
o And provide the Registrar with info that is required
If the Registrar is satisfied that the director, member, trustee or partner does not comply,
the FSP’s license may be withdrawn by the Registrar
What must a Financial Services Provider (FSP) do?
Control measures required by the FSP relating to Risk Management
How Risk Management relates to the FSP: A provider must at all times
• Have and effectively employ the
o resources,
o procedures
o and appropriate technological systems that can be expected to eliminate as
far as possible
§ the risk that clients
§ product suppliers
§ and other providers or
§ representatives will suffer
o financial loss through
§ theft
§ fraud
§ other dishonest acts
§ poor administration
§ negligence
§ professional misconduct or
§ culpable omissions
A provider must structure the internal control procedures concerned so to provide
reasonable assurance that the
• business can be carried on in an orderly and efficient manner
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• financial and other information will be reliable
• all applicable laws are complied with
An FSP must ensure that any remuneration or fee paid in respect of an activity or function
for which a person is appointed as a representative:
• is reasonable and commensurate with the actual function or activity; and
• is not structured in a manner that may increase the risk of unfair treatment of
clients.
An FSP must develop appropriate contingency plans to ensure the continued function of the
FSP’s business and continued service to its clients in the event that the appointment of the
representative is terminated or becomes ineffective.
An FSP may not permit a representative to outsource or sub-delegate any activity or part
thereof relating to the rendering of financial services that that representative performs on
behalf of the FSP.
FSP’s Governance Framework
FSP’s must adhere to good corporate governance requirements. Directors (or the persons
that control the FSP’s) and the Key Individuals must display personal ethical behaviour.
Governance framework is based on -
• Effective, adequate systems of corporate governance, risk management and internal
controls including;
• Business plan : aims strategies, scope
• Setting the risk level tolerance
• Effective procedures and systems
• FIC risk management requirements
• Ensuring compliance
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• Ability to detect risk of compliance failure
• Provide for corrective actions
• Provide for safeguarding the security, integrity and confidentiality of
information
• Back-ups and security measures
• Physical security of assets
• Disaster Recovery Plan
• Accounting policies and procedures
• Ability to report to Registrar timeously
• Sound and sustainable remuneration policies
• Business continuity plan
• Provide for regular monitoring and evaluation of all systems, processes ,
policies and procedures
• Appropriate segregation of duties
Please note:
Although many of the above may be delegated to Key Individuals and Compliance Officers,
the FSP ultimately remains responsible and accountable for compliance with the Act
Additional requirements applicable to FSPs that provide automated advice In addition to the requirements an FSP that provides automated advice must:
• Have adequate HR resources to understand the technology and algorithms
• Understanding of the logic embedded in the algorithms
• Understand the preferences or biases
• Understand the risks and rules behind the algorithms
• Understand the risk to clients from automated advice
• Monitor and review the suitability and quality of the automated advice given
• Establish, implement and maintain adequate policies and procedures to test
and review the auto advice
• Ensure clients whom the advice is not suited to are filtered out
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• Have appropriate system design documents
• Have procedures for managing changes
• Review and update algorithms when there are market or legislative changes
• Be able to suspend the provision of advice if an error is detected
• Be able to maintain client records
• Protect confidentiality
• Meet current and future operational needs and capacity
OUTSOURCING
Outsourcing of functions to a person other than a representative of the FSP
Due care skill and diligence to be exercised when outsourcing any function that is integral to
the business
An FSP must ensure that the person to whom the activity or function is outsourced ;
• Has the ability and capacity required by law
• The FSP must have assessment procedures in place to ensure standards of
performance are assessed
• Have a written contract providing;
o rights, responsibilities
o Provide for access to information by FSP and Registrar
o Address sub-outsourcing and
o Confidentiality
• Properly supervise the outsourcing
• Manage the risks
• Retain expertise to supervise outsourced functions
• Be able to terminate without affecting the continuity and quality of service
to clients
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• Establish, implement and maintain a disaster recovery plan and testing
processes
• Have effective access to data and premises
• Ensure the outsourcing does not compromise the fair treatment of clients, or
continuous service or result in key decision making being removed from FSP
Maintainingalicense
Undesirable Business Practice This is regulatory action taken by the Registrar (FSB) (now the FSCA)
• The Registrar may declare a business practice undesirable
• If the practice, directly or indirectly could
o Harm the relations between authorised FSP’s, clients or the general public
o Unreasonably prejudice any client
o Deceive any client
o Unfairly affect any client
• And if the practice is allowed to continue, one or more objects of the Act will or is
likely to be defeated
• Firstly, the Registrar may publish (at any time)
o in the official website, Gazette that he is of the intention to declare a
business practice undesirable,
o and interested persons may make written representations to the Registrar
o within 21 days (after publication)
• An FSP may not carry on business from the date of publication of the notice (this
refers to the actual declaration, not the intention to declare)
• If the FSP continues with the same practise, they will have 60 days to rectify
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• If not rectified, they will face the same penalties (R10 million fine and / or
imprisonment of 10 years)
Suspension or Withdrawal of License This is regulatory action taken by the Registrar (FSB) (now the FSCA)
• The Registrar may at ANY time suspend or withdraw any license if satisfied, based on
available facts and information, that the licensee –
o No longer meets the licensing requirements or licensee/key individual does
not meet fit & proper requirements
o Did not, during application for the license, make full disclosures of all relevant
information to the Registrar, or furnished false or misleading information
o Failed to comply with any provisions of the Act
o Is liable for payment of a levy (section 15A of Financial Services Board Act), a
penalty (civil remedy) (section 41) or administrative sanction (undesirable
practice) (section 6D) of the Financial Institutions (Protection of Funds) Act 28
of 2001 of
o Does not have an approved key individual
o Has failed to comply with any directive issued under this Act
o Has failed to comply with any condition or restriction imposed under this Act
Process to be followed when suspending or withdrawing the license
Before suspending or withdrawing the license, the Registrar
• May consult any regulatory authority
• Must inform the licensee of
o the intention to suspend or withdraw
o the grounds therefore
o and give the licensee opportunity to make a submission in response thereto
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• Where the Registrar contemplates suspension of the license, the Registrar must
inform the licensee of:
o The intended period to suspend
o Terms attached to the suspension, including
§ Prohibition on concluding new business
§ Terms to lift the suspension
• The Registrar must consider the response received
o And may decide to suspend or withdraw
o Or not to suspend or withdraw the license
o And notify the licensee
• If suspended or withdrawn, reasons will be made known by notice on the official
web site and may make such information known by any other appropriate media
• Reinstatement of a license
The Registrar must, after receiving a response from the licensee, decide to
• Lift the provisional suspension or withdrawal
• Or render the suspension or withdrawal final
o And inform the licensee accordingly
The Registrar must publish on the official website (and other appropriate media if
necessary) the terms and reasons for the final suspension or withdrawal, or the lifting
thereof
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Lapsing a license This is action taken by the FSP
A license lapses where:
• The Licensee, being a natural person,
o Becomes permanently incapable of carrying on any business due to physical
or mental disease or serious injury
o Is financially sequestrated
o Dies
• The Licensee, being any other person, is
o Finally liquidated or dissolved
• Where the business of the licensee has become dormant
• In any other case, where the licensee finally surrenders the license to the Registrar
Process to be followed when lapsing a license
The Registrar must be advised in writing
• By the licensee,
• Any KI or
• Person in control of the licensee’s affairs
o of the lapsing of the license
o reasons therefore
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The Registrar may publish in the official website, Gazette, or other appropriate media, the
details regarding the lapsing of the license
Format of communication with the Regulator
In writing (fax or any electronic medium)
GeneralCodeofConduct
The purpose of the Code of Conduct The purpose of the Code of Conduct is to ensure that Clients are able to make informed
decisions and that their financial needs will be satisfied appropriately and suitably
The Code of Conduct must make provision for
• Making adequate disclosures of relevant information, including own interests (actual
or potential)
• Keeping adequate and appropriate records
• Avoiding fraudulent and misleading advertising
• Keeping documents and funds from clients safe and separate
• Suitable guarantees, Professional Indemnity cover or Fidelity Insurance
• Controlling, or prohibiting incentives given, or accepted, by the Provider
• Any other matter which is necessary or expedient to be regulated to better achieve
the objects of the Act
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Disclosure requirements:
Whenrenderingfinancialservicestoclients, Providers must ensure that representations made and information provided to clients
• Are factually correct
• Provided in plain language
• Must be adequate and appropriate, taking into consideration the assumed level of
knowledge of the client
• Must be provided timeously to afford the client to make an informed decision
• May be provided orally and confirmed in writing if the client requests it
• Must be in a clear and readable print size
• All amounts, sums, charges, values, fees, remuneration or monetary obligations
must be reflected in specific monetary terms, or if not possible, the calculation
thereof
• It does not need to be duplicated, unless material or significant changes take place
• The FSP must disclose any personal interest or circumstance that could give rise to a
conflict of interest
• The client must be treated fairly
• The FSP must disclose any non-cash incentives offered or other indirect
considerations payable by another provider
• The service must be rendered according to the contractual relationship, as soon as
possible in the best interest of the client
• Client transactions must be accounted for
• The provider must not deal with any product for own benefit, account or interest
When dealing with a client:
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• When contacting a client, always act honourably, professionally and with due regard
to the convenience of the client
• At the commencement of the contract, explain the purpose of the visit or call and
provide all of the disclosure requirements to the client
• Where the provider is able to offer the client with a choice of product suppliers’
products, the provider must do so in the interest of the client, and exercise judgment
objectively
• When dealing with a client, a provider may not compare different financial products,
product suppliers, providers or reps, unless the differing characteristics
v Are made clear
v And no inaccurate, unfair, or unsubstantiated criticism may be made
Procedures and systems to be in place
FSP to ensure there are procedures, policies and systems in place to:
• To record verbal and written communications
• Store and retrieve records
• Keep client records safe from destruction
• The nature, extent and frequency of any incentive, remuneration, consideration,
commission, fee or brokerages (valuable consideration) that the provider will be
paid or become eligible for from any product supplier, and the identity of the
product supplier must be disclosed
What information needs to be disclosed?
A provider must disclose:
A provider (except direct marketers) must disclose to clients the following information:
Details of the product supplier:
• Name, address, postal and telephone contact details of the product supplier
• The contractual relationship with the Product Supplier (PS)
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• Names and contact details of the relevant compliance and complaints departments
of the PS
• If any conditions or restrictions are imposed by the PS
• Where applicable, the fact that the provider
v Directly or indirectly holds more than 10% of the PS’ shares (or equivalent
substantial financial interest)
v Received more than 30% of its total remuneration, including commission,
from the PS
• When a PS enters into a contract with an intermediary, it must provide the provider
with the details to enable the provider to comply with the Disclosure requirements
If done orally, it must be provided in writing within 30 days
Details of the provider (FSP): • Full business and trade names
• Registration number
• Postal and physical addresses
• Telephone and where applicable, cell phone numbers
• Internet and e-mail addresses
• Names and contact details of the appropriate contact persons or offices
• Details of legal and contractual status of the provider
• Names and contact details of the compliance department
• Details of the financial service that the provider provides, and any conditions or
restrictions applicable
• Whether the provider holds guarantees or PI or Fidelity insurance cover, or not
• Whether the Rep renders services under supervision
• Any exemptions granted by the Registrar
Ethical conduct What does it mean when we say that advisors need to operate ethically within the financial
services environment?
• Complies with the Fit and Proper requirements
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• Complies with the GCoC by:
o Managing conflicts of interest
o Making relevant disclosures
o Creating an environment in which clients can make informed decisions
Termination Subject to the Act, the GCoC and the procedures and systems relating to Conflict of Interest
• A provider must allow a client that wants to terminate any agreement, to do so
• Where the client does so based on the advice provided, the provider must ensure
that the client fully understands the implications of terminating the product
A provider that ceases to operate must • Immediately notify all affected clients
• Take steps to ensure that outstanding business is completed or transferred to
another provider
Where a representative ceases to operate, the provider must • Immediately take steps to notify all affected clients
• Ensure that outstanding business is completed or transferred to another rep
Recordofadvice A provider must maintain a record of advice furnished to the client which must reflect
• A brief summary of the information
• The financial products considered
• The financial products recommended with an explanation of why the product or
products were selected
This only needs to be kept, if to the knowledge of the provider, the transaction was
concluded based on the advice provided
• A copy of the record of advice must be provided to the client (except direct
marketers)
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Client confidentiality and access to records
A provider may not
• Disclose any confidential information acquired or obtained from
o a client, or
o Product supplier
• Unless written consent of the client or product supplier has been obtained
• Or disclosure of the information is required in the public interest or under any law
(i.e. FICA)
FSP’s who receive or hold client funds or products
The FSP must account for client’s products or funds properly and promptly
• When documents of title (deeds) are lodged, the FSP must immediately provide a
receipt containing a description of the documents that was received
• When a provider receives funds into safe custody (without a bank) it must issue a
written receipt when it is received
• Take all reasonable steps to safeguard the products or funds
• Ensure that funds or products are strictly dealt with in accordance with the mandate
given
• Client funds or products must be readily discernible from the provider’s assets
• Depending on the contract, the client must have access to their funds paid into the
bank account, less the charges and fees that need to be paid by law
• If the transaction was dealt with in writing, the client must receive the original
agreement
• The FSP must open and maintain a separate bank account
o Pay all clients funds into account within one business day
o This account may only contain client funds (no provider funds)
o Pay all bank charges (except deposit and withdrawal funds for the client’s
account)
o Interest earned is payable to the owner of the funds /client
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• The opening and maintaining of a separate not applicable to:
o Providers that holds or deals with premiums under a short term reinsurance
policy
o Subject to section 45 of the STIA, 1998 (IGF)
Conflict of Interest
What does conflict of interest refer to? Conflict of interest means
• Any situation in which a provider or rep has
• An actual or potential
• Interest that may, when rendering service to a client
o Influence the objective performance of his/her obligations to the client
o Prevent a provider or rep from rendering unbiased and fair financial services
to the client
• Which includes, but is not limited to
o A financial interest
o An ownership interest
o Any relation with a 3rd party
Ensuring transparency and manage conflict of interest:
Financial interest and conflict of interest management policy:
A provider or its reps may only
• Receive or offer
• The following financial interest from or to a 3rd party
o Commission (authorised under the Long Term, Short Term or Medical
Schemes Act)
o Fees authorised (under the Long Term, Short Term or Medical Schemes Act)
o Fees for rendering financial services (if the above is not paid)
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§ If agreed with the client
§ Client may stop the charging of the fee
o Reasonable fees or remuneration for rendering services to a 3rd party
o An immaterial financial interest
o Any other financial interest
A provider may not • Offer any financial interest to a Rep for
o Giving preference to the quantity of business to the exclusion of the quality
of service rendered to clients
o Giving preference to a specific product supplier
o Giving preference to a specific product of a product supplier
A provider must adopt, maintain, and implement a conflict of interest management policy
that complies with the Act
Theconflictofinterestmanagementpolicymust:
Provide for the management of conflict of interest and
• Mechanisms to identify conflict of interest
• Measures to avoid conflict of interest
• Processes, procedures and internal controls to facilitate compliance with the policy
• Consequences of non-compliance
• Specify the type and basis on which a Rep will qualify for a financial interest that the
provider offers
• Include a list of all associates
• Include the names of any 3rd parties in which the provider holds ownership
• Include the names of any 3rd parties that holds an ownership interest in the provider
• Include the nature and extent of ownership interest
• Drafted in an easily comprehensible manner
• And must also be adopted by the sole proprietor
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• The provider must ensure that its employees, reps (and associates) are aware of the
contents of the policy and provide for training and educational material in this
regard
• Provider must monitor compliance
• Provider must conduct an annual review of the policy
• Provider must publish the policy in the appropriate media (easily available for public
inspection)
• Compliance with this section cannot be avoided using an arrangement with an
associate
• The Compliance Officer must include a report to the Registrar on the policy
• This report must at least report on the
o Implementation of the policy
o Monitoring of the policy
o Compliance with the policy
Complaints handling When a client wants to complain, the provider must
• Request the client to lodge the complaint in writing
• Maintain a record of complaints for a period of 5 years
• Handle complaints in a timely and fair manner (a period of 6 weeks is prescribed)
• Takes steps to investigate and respond promptly to complaints
• When the complaint is not resolved to the satisfaction of the client, advise the client
of any further steps which may be available to the client in terms of the Act or any
other law
Internal Complaints resolution system A provider must maintain an internal complaint resolution system based on the following
• Maintenance of a policy outlining the provider’s commitment, system and
procedures for the internal resolution of complaints
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• Transparency and visibility – ensuring that clients have full knowledge of the
procedures for resolution of their complaints
• Accessibility – easy access to procedures at any office or branch of the provider open
to clients, or through post, fax, telephone or electronic helpdesk support
• Fairness – ensuring the resolution of a complaint can be effected which is fair to the
client, the provider and its staff
The internal complaint resolution system and procedures of the provider must be designed
to ensure the existence and maintenance of at least the following for purposes of effective
and fair resolution of complaints
• Available adequate manpower
• Training of staff relating to the Act, the Rules and the G.C.o.C. regarding resolution of
complaints
• Ensure that responsibilities and mandates are delegated to facilitate resolution of
complaints of a routine nature
• Ensure that non-routine or serious complaints are escalated to staff with adequate
expertise
• Internal follow-up procedures to ensure avoidance of occurrences giving rise to
complaints, or to improve services and complaint systems
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The system and procedures must contain arrangements which –
Must
• Reduce the system to writing
• Provide access to the procedures are available to clients at any branch of office, or
electronic medium, and that the availability is made known to clients
• Include a clear summary of the Act which will apply when the client, after the
dismissal of a complaint, wishes to pursue further proceedings before the Ombud
• And include the Ombud’s name, address and other contact particulars
• Stipulate that complaints be submitted in writing
• Provide that the receipt of the complaint is acknowledged in writing to the client
with details of contact staff and must be recorded internally by the relevant staff
• The complaint to be forwarded to the relevant staff appointed to consider its
resolution and that –
o Complaint receives proper consideration
o Appropriate management controls are in place to exercise effective control
and supervision of the process
o The client is informed of the result within 6 weeks
§ If the outcome is not favourable to the client
• Full written reasons must be furnished
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• Advise the client that the complaint can be pursued within 6
months with the Ombud and provide the client with the
Ombud’s name, address and other contact particulars
§ If the outcome is resolved in favour of the client, ensure that full and
appropriate redress is offered without delay
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Advertising An advertisement by any provider must:
• Not contain any untrue or misleading statement, forecast or promise
• If it contains:
o performance data, references to their source and date must be included
o illustrations, forecasts or hypothetical data
§ it must contain support in the form of clearly stated basic
assumptions that should be achievable if current circumstances
prevail
§ make it clear that it is not guaranteed
§ if it is dependent on market conditions or underlying assets, clear
indications must be made of such dependence
o a warning statement about risks involved, this warning statement must be
prominently be displayed
o information about past performances, it must contain a warning that past
performances are not necessarily indicative of future performances
• if the investment value is not guaranteed, contain a warning that no guarantees are
provided
When a provider advertises by telephone
• The provider must maintain an electronic, voice logged record of all communications
• where no financial service is rendered as a result of the ad, the records do not have
to be maintained for longer than 45 days
• the Registrar must be provided with a copy within 7 days from the Registrar’s
request
• All of the info required in terms of disclosures (physical details, conditions of
restrictions and compliance department) is not required
o Provided that the client is supplied with basic details of the provider and their
compliance departments (name, address and telephone number)
o And full details are provided to the client in writing within 30 days
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When a provider advertises a financial service by means of a public radio service
• The advertisement must include the business name of the provider
• Must state that they are an authorized financial services provider
Record keeping
An FSP must the following records for a minimum of 5 years after termination of the
following:
o Known premature cancellations
o Complaints received (and whether they were resolved)
o Continued compliance with the licensing requirements
o Cases of non-compliance, and reasons therefore
o Continued compliance by representatives with the qualification requirements
Records MAY be kept in an appropriate electronic and recorded format, provided that it can
be reduced to written or printed form
• An FSP does not have to keep their own records, but must ensure that it is available
within 7 days of the Registrar’s request
• All records (written and verbal communications) must be kept for a period of 5 years
after termination (to the knowledge of the provider) of the
o Product concerned
o Or after the rendering of the financial service
• An FSP must ensure that internal control structures, procedures and controls are in
place which at least includes the following:
o Segregating duties, roles and responsibilities from an operational risk
mitigation perspective
o Applying logical access security
o Access rights and data security on electronic data
o Physical security of the FSP’s assets and records
o Documentation relating to business processes, policies and controls
o System application testing
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o Disaster recovery and back-up procedures
o Training for Reps and KI’s on the Act and rendering financial services / giving
advice
o A business continuity plan
PenaltiesintermsoftheAct
• Any person who makes a misleading, false or deceptive statement, or conceals a
material fact
• Any person who gives an appointed auditor or compliance officer information which
is false, misleading or conceals any material fact
• Any person who is not a Rep mandated or employed by an authorised FSP, and who
declares, pretends, gives out, maintains or professes to be authorised to render
financial services
• Any person who fails to comply with the Act in terms of
o Section 7 (May not act as an FSP without a license)
o Section 8 (Displaying of the license)
o Section 13 (Rep may not work for an unauthorised FSP and must give certified
proof that s/he is employed or mandated and that the FSP takes responsibility
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and that adequate insurance is in place and the FSP must ensure that Reps and
KI’s are competent to act and abide with the Code of Conduct)
o Section 14 (FSP to debar a Rep that do not comply with the Act)
o Section 17 (Compliance officer, or FSP who does not need to appoint a CO, must
submit reports to the Registrar)
o Section 18 (Maintaining records)
o Section 19 (Auditing of Financial Statements and Reporting Irregularities)
o Section 34 (Undesirable business practices)
Is guilty of an offence and is on conviction liable to a fine not exceeding R10 000 000 or to
imprisonment for a period not exceeding 10 years, or both fine and imprisonment
TheComplianceOfficer:
Roles and functions of a Compliance officer
• Any FSP with more than 1 KI or more than 1 Rep must appoint a Compliance officer
• A Compliance Officer must have the suitable qualifications and experience
• Compliance Officers must, just as an auditor of an FSP, report irregularities or
suspected irregularities to the Registrar
• The Registrar must approve the appointment of the Compliance Officer
• The Registrar may withdraw the approval if satisfied on the basis of available facts
and information that the Compliance Officer:
o Has contravened or failed to comply with any provisions of the Act, or
o No longer complies with the criteria and guidelines determined by the Registrar
• FSP’s that only consist of one KI or without a Rep does not have to appoint a
Compliance Officer, but must establish compliance procedures and submit reports
• An FSP must ensure that a compliance function exists or is established as part of the
risk management framework of the business supervised by an approved compliance
officer
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• The compliance function must be exercised with diligence and care
• The Compliance Officer must provide the FSP with
o written reports on the course of, and
o progress achieved with compliance monitoring duties
o and make recommendations
Approval of a Compliance Officer by the Registrar
Phase 1 approval • Means the approval by the Registrar of an applicant’s qualifications, experience and
personal character qualities of honesty and integrity
Phase 2 approval • Means the approval granted by the Registrar to an applicant to render compliance
services to a specific provider
Criteria for Phase I approval An applicant must:
• Hold a qualification on the list of recognised compliance qualifications
• Passed the regulatory exam
• Have 3 years’ experience in performing risk management or compliance function
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• Comply with the personal characteristics of honesty and integrity
• Have 1 years’ experience in performing a compliance risk management function in
respect of the category of providers the applicant seeks to obtain approval to render
compliance services
• Not be an un-rehabilitated insolvent, entered into a compromise with creditors or
been provisionally sequestrated or liquidated
• Have adequate access to communication facilities
Criteria for Phase II approval Applicant or practice must have phase 1 approval
• Registrar must be satisfied that an applicant and practice have
o Adequate resources available to ensure the efficient rendering of compliance
services and
o Direct access to, and demonstrable support from, senior management of the
provider
• Registrar must be satisfied that an applicant and practice will be able to
o Render compliance services independently and objectively
o Avoid conflict of interest in rendering compliance services
o Keep records and supporting documentation of activities undertaken in the
course of compliance reviews, visits or monitoring
o Assist the provider in the compilation of an appropriate risk management
strategy
o Liaise with the Registrar
o Conduct regular reviews of financial services rendered by the FSP and Reps
• The Registrar must be satisfied that the applicant and practice who apply for
external compliance officers are able, in respect of
o Category I and IV providers, to conduct regular visits to the
branches/premises/business units of the provider
§ Not less than once a quarter and in respect of Reps, twice a year
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o Category II, IIA and III providers, to conduct regular visits to the
branches/premises/business units of the provider and reps
§ not less than once a month
• The Registrar must be satisfied that the applicant and practice who apply for an
internal compliance officers are able, in respect of
o Category I and IV providers, to conduct regular visits to the
branches/premises/business units of the provider and any Reps
§ Not less than once a year
o Category II, IIA and III providers, to conduct regular visits to the
branches/premises/business units of the provider and reps
§ not less than once a quarter
• Applicant & compliance practice must ensure that the number of clients allocated to
any applicant or compliance officer, are at all times sufficient to ensure proper
compliance services being rendered
• The Registrar will approve phase 1 & 2 approval if the fee is paid
• No Compliance officer may render services without phase 1 & 2 approval, except if
the Compliance Officer is an internal compliance officer, who sourced the function to
a Compliance Practise
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Application as an Officer or Practice
• An applicant or compliance practice must apply on the application forms
• To apply for approval of a Compliance Practice:
o Partnership where all the partners are natural persons and compliance officers
o A Company or Close Corporation and the Directors or Members are compliance
officers with Phase 1 approval
• Where a member of a CC dies, the estate of the member may hold the interest for 6
months, or longer if the Registrar approves it
• If the Registrar is satisfied that the applicant or practice complies with the criteria for
–
o Phase I approval
§ The Registrar may grant Phase 1 approval and issue an approval
number on payment of the prescribed fee
o Phase II approval
§ The Registrar must grant Phase 2 approval on payment of the
prescribed fee
• No person may render compliance services without having obtained Phase I and
Phase II approvals, except Internal Compliance Officers
Responsibilities of the Compliance Officer and FSP
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• The FSP must establish and maintain procedures to be followed by the provider and
Reps to ensure compliance with the Act
• The compliance officer (or FSP responsible for own compliance) must
o Submit reports to the Registrar
o In the manner and regarding matters
o Determined by the Registrar
• An approved Compliance Officer must provide an FSP with written reports on
o The course of and
o Progress achieved with
o Compliance monitoring duties and
o Make recommendations to the provider
• The compliance function must be exercised with diligence and care
Reportable Irregularities
§ The auditor of an FSP must report to and inform the Registrar in writing of any
irregularity or suspected irregularity in the
o Conduct or
o Affairs of the FSP
o Which is material
Withdrawal of approval
• The Registrar may withdraw the approval if satisfied on the basis of available facts
and information that the Compliance Officer:
o Has contravened or failed to comply with any provisions of the Act, or
o No longer complies with the criteria and guidelines determined by the
Registrar
TheFAISOmbudsman
The Ombud is known as the Ombud for FSP’s (FSP Ombud) or the FSB (now the FSCA)
Ombud. The FAIS / FSB (now the FSCA) Ombud is different from the Long Term / Short
RE5 Training Manual – Updated May 2018 92
Term insurance Ombud, as they deal with the relevant terms and conditions of an insurance
policy (i.e. claims that have been rejected by the Underwriter/Insurer), whereas the FAIS
Ombud will deal with any complaints relating to advice and or intermediary services with
the relevant FSP or provisions in the FAIS Act.
Roles and powers of the Ombud
• To consider and dispose of complaints
• in a procedurally fair, informal, economical and expeditious manner
• with due regard to
o the contractual arrangement or other legal relationship between the
complainant and any other party to the complainant and
o the provisions of the Act
• The Ombud is independent and must be impartial
Submission of a complaint to the Ombud The Ombud must
• determine whether the “rights of complainants” requirements have been complied
with
• In the case of non-compliance, act in accordance with the rules applicable to that
section
• Otherwise officially receive the complaint if it qualifies as a complaint
Instances of when the FAIS Ombud will not accept the complaint
• The act or omission occurred before 01 October 2004
• You have instituted legal action against the FSP and / or representative
• The amount claimed is more than R800, 000, however if you if you agree to abandon
the amount that exceeds R800, 000, the Ombud might consider the complaint
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Prescription period
• Only complaints that relates to an act or omission which occurred within the last 3
years must be accepted
• If the complainant only became aware of the act or omission within the last 3 years,
even though the act or omission occurred more than 3 years ago, the complaint may
be received by the Ombud (the person ought to reasonably have become aware)
• If the act or omission occurred before the FAIS Act was enacted, the Ombud will
refuse the case
Decline to investigate
• The Ombud must decline to investigate a complaint if proceedings have been
instituted in any Court by the complainant
• Where proceedings are instituted during investigation by the Ombud, the Ombud
will not proceed
• The Ombud may decide that the matter be dealt with by a Court, or another dispute
resolution process, and decline to entertain the complaint
Investigation of the complaint The Ombud must not proceed with a complaint unless:
• All interested parties have been informed
• Is satisfied that all interested parties have been provided with the particulars to
enable them to respond
• Has provided all parties the opportunity to respond
• The Ombud may follow and implement any procedure (including mediation) which
the Ombud deems appropriate, and may allow any party legal representation
• The Ombud must firstly explore any prospect to resolve the matter by a conciliated
settlement acceptable to all parties
• May make a recommendation to the parties
v Requiring them to confirm whether they accept the recommendation, or not
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• Where the recommendation is not accepted,
v Requiring that party to provide reasons for not accepting it
• May delineate (portray precisely) functions of investigations and determinations
between various functionaries of the Office
• May mandate any person or tribunal to perform any functions
Matters not settled or not accepted by all parties The Ombud could
• Dismiss the complaint
• Uphold the complaint, wholly or partially
o Award the complainant an amount as fair compensation for financial
prejudice or damages suffered
o Issue a direction against the FSP, Rep or other party concerned
o May make any order which a Court may make
Monetary awards
• Monetary awards may bear interest as determined by the Ombud
• The Board may determine
o The maximum monetary award for a particular kind of prejudice or damage
o Different maximum monetary awards for different categories of complaints
o The granting of costs against a complainant in favour of the respondent, if in
the opinion of the Ombud
§ The conduct of the complainant was improper or unreasonable
§ The complainant was responsible for an unreasonable delay in the
finalisation of the investigation
• The monetary award may not exceed the rate which a Court would have entitled an
award
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The determination by the Ombud
• The Ombud will reduce the determination to writing
• Including the reasons therefore
• Sign the determination
• Send copies to the Registrar and all other concerned parties
• If no appeal is lodged in the specified time period, the Ombud will send a copy to the
clerk or registrar of court which would have had jurisdiction if the matter had been
heard in court
• Where a notice of appeal is lodged, the Ombud must send a copy of the final
decision of the Board of Appeal to the clerk or registrar
• The determination by the Ombud or Board of Appeal is regarded as a civil court
judgment of a Court
• It is only appealable to the Board of Appeal with the leave of the Ombud, after
considering
o The complexity of the matter
o The likelihood that the Board of Appeal (BoA) may reach a different
conclusion
o With the permission of the chairperson of the BoA, the Ombud may refuse
the leave to appeal
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• After two weeks following the determination by the Ombud or BoA, the clerk or
registrar of the Court may issue a writ of execution which may be executed by the
sheriff of the Court
Rules of proceedings by the office of the Ombud
• The Ombud may grant costs against the respondent, or complainant, in favour to
one another or in favour of the Office
• The costs awarded must be quantified by the Ombud with due regard to
o Nature of the complaint
o Time spent on the complaints
o Expense and inconvenience caused to the other party
o The conduct of a party
o Any other factor deemed appropriate by the Ombud
• The Ombud can award costs and interest
• Please note that the non-refundable case fee payable to the Ombud (of R1 000) has
been discontinued and therefore it is not payable any longer
Penalties
• Any person who commits any act in respect of the investigation, if it were committed
in a court would have constituted contempt of court, is guilty of an offence and
liable for a penalty
Any person who wilfully interrupts any proceedings, is guilty of an offence and liable on
conviction of to a fine, not exceeding 1 year
Schedule1–LawsamendedorrepealedbytheFAISAct:
• Financial Services Board Act, 1990
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• Stock Exchanges Control Act, 1985
• Financial Markets Control Act, 1989
• Drugs and Drug Trafficking Act, 1992
ProductCategories
The product categories in FAIS Each authorised FSP is licensed to sell certain FAIS products.
FSPs may have various licenses in respect of different product categories. The product
Category may also have different products falling in the main Category and these are called
product sub-categories. The Category descriptions in the FAIS Act are as follows:
• “Category I”, in relation to a financial services provider, means all persons, other
than persons referred to in Categories II, IIA, III and IV, who are authorised to render
the financial services (other than financial services mentioned in Categories II, IIA, III
and IV) as set out in the relevant application;
• “Category II”, in relation to a financial services provider, means all persons who are
authorized as discretionary FSPs as set out in the relevant application;
o You will note that all products that fall into Category I also falls into Category
II EXCEPT:
§ Long Term Insurance Category A (Funeral)
§ Short Term Insurance Personal and Commercial Lines – all
subcategories
§ Health Service benefits
§ Friendly Society benefits
o The reason being that the nature of these products are not investment based
and therefore action is only taken on them when requested so by the client.
The client does not give the intermediary/representative a mandate to move
funds around to increase profits etc.
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• “Category IIA”, in relation to a financial services provider, means all persons who are
authorized as hedge fund FSPs as set out in the relevant application;
• “Category III”, in relation to a financial services provider, means all persons who are
authorized as administrative FSPs as set out in the relevant application;
• “Category IV”, in relation to a financial services provider, means all persons who
require licences as Assistance Business FSP.
Product Sub-categories in Category I, II, IIA, III, IV
Financial Product Explanation TABLE A: CATEGORY I
EXPERIENCE REQUIREMENTS
FOR AN FSP AND
REPRESENTATIVE
1 CATEGORY 1 Advice: Min
Experience
Intermediary
Services:
Min. Exp.
1.1 Long-term Insurance
subcategory A
Listed as an “Assistance”
Policy in the Long term
Insurance Act.
It covers long term policies
that provide up to R30, 000
in total benefits. It has no
investment value (Funeral
Products)
6 months 2 months
1.2 Short-term Insurance
Personal Lines
The insurance of
possessions owned and
used for personal use
1 year 6 months
1.3 Long-term Insurance
subcategory B1
Risk policies which provide
cover in respect of death,
disability and health events,
and do not have any
investment or growth
Example: Credit Life Policy
1 year 6 months
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Financial Product Explanation TABLE A: CATEGORY I
EXPERIENCE REQUIREMENTS
FOR AN FSP AND
REPRESENTATIVE
1 CATEGORY 1 Advice: Min
Experience
Intermediary
Services:
Min. Exp.
1.4 Long-term Insurance
subcategory C
All other Long Term
Insurance policies.
Example: Life & Dreaded
disease policy when an FNA
was performed (determined
future risk requirements
etc.)
1 year 6 months
1.5 Retail Pension
Benefits
Pension, Provident or
Preservation fund policies
that are sold to individuals
1 year 6 months
1.6 Short-term Insurance
Commercial Lines
The insurance of things
owned and used for
Commercial purposes
1 year 6 months
1.7 Pension Fund Benefits
(excluding retail
pension benefits)
Pension and Provident
funds that are designed for
groups of people.
The group then benefits as
a whole from the
investments of the
premiums paid in.
1 year 6 months
1.8 Securities and
Instruments: Shares
A person can buy shares in
a business and will benefit
by being paid out on a
2 years 1 year
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Financial Product Explanation TABLE A: CATEGORY I
EXPERIENCE REQUIREMENTS
FOR AN FSP AND
REPRESENTATIVE
1 CATEGORY 1 Advice: Min
Experience
Intermediary
Services:
Min. Exp.
regular basis from the
profits made by the
company – called
“Dividends”.
There is no guaranteed pay
out so this can be risky.
The company may be listed
on a securities exchange
(JSE) or can sell shares
privately if not listed.
1.9 Securities and
Instruments: Money
market instruments
This is a bank deposit
account where the Banks
use the money to do short
term investments and
loans. The interest received
depends on the success of
the Bank’s investment and
short term loan strategy.
There is a high minimum
balance required and
generally a restriction on
withdrawals.
2 years 1 year
1.10 Securities and
Instruments:
Debentures are used when
a business or the
2 years
1 year
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Financial Product Explanation TABLE A: CATEGORY I
EXPERIENCE REQUIREMENTS
FOR AN FSP AND
REPRESENTATIVE
1 CATEGORY 1 Advice: Min
Experience
Intermediary
Services:
Min. Exp.
Debentures and
securitised debt
government needs to
borrow money over a long
time without having any
security or collateral. A
simple explanation is that
they borrow money and
give the lender an IOU.
This type of instrument
depends on the integrity of
the borrower as to whether
people will lend the money.
Securitised debt is when a
business borrows money
which is guaranteed by an
asset that the company
owns.
Example a clothing store
may have a book of
customers which owes
them money over 6
months. The company may
need all that money
immediately to buy more
stock so will borrow the
RE5 Training Manual – Updated May 2018 102
Financial Product Explanation TABLE A: CATEGORY I
EXPERIENCE REQUIREMENTS
FOR AN FSP AND
REPRESENTATIVE
1 CATEGORY 1 Advice: Min
Experience
Intermediary
Services:
Min. Exp.
money based on the value
of the money that they
should receive over the
next 6 months.
1.11 Securities and
Instruments:
Warrants, certificates
and other instruments
A Warrant is when a person
pays for the right to buy
stock or commodities at
some future date at a pre-
determined price. They may
or may not exercise this
option.
This warrant can be sold to
somebody else before the
due date.
2 years
1 year
1.12 Securities and
Instruments: Bonds
When the government or
large corporate wants to
borrow a large sum of
money for a particular
project and repay it over a
long term they will sell
“bonds”. The buyer will get
a guaranteed rate of
interest until a maturity
date when they can
2 years 1 year
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Financial Product Explanation TABLE A: CATEGORY I
EXPERIENCE REQUIREMENTS
FOR AN FSP AND
REPRESENTATIVE
1 CATEGORY 1 Advice: Min
Experience
Intermediary
Services:
Min. Exp.
withdraw the original
capital (money paid in the
beginning).
Some of the stadiums for
the Soccer World Cup were
financed by Bonds.
1.13 Securities and
Instruments:
Derivative
instruments excluding
warrants
Buying an asset which will
only have a value at a
future date.
Example: a person wants to
be able to buy a harvest of
sunflowers to make cooking
oil. He will pay the farmer
for the harvest even before
the flowers have started
growing. He will then be
guaranteed that he will
have seeds to make oil
when the flowers are
harvested. However, he can
sell the instrument before
then if he realises it would
be more profitable to sell
the derivative instrument
2 years
1 year
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Financial Product Explanation TABLE A: CATEGORY I
EXPERIENCE REQUIREMENTS
FOR AN FSP AND
REPRESENTATIVE
1 CATEGORY 1 Advice: Min
Experience
Intermediary
Services:
Min. Exp.
rather than make the oil.
1.14 Participatory Interests
in Collective
Investment Schemes
Often referred to as “Unit
Trusts”
Shares can be very
expensive to buy and many
people want to share in the
possibilities of investment
on a Securities Exchange
(e.g. JSE). Collective
Schemes mean that many
people can pay a small
amount to an intermediary
(Discretionary FSP)
sometimes called an
investment manager who
will then invest the total
large sums of money in
expensive shares.
The interest or dividends
paid out will depend on the
type of securities invested
in and the performance of
these.
1 year I year
1.15 Forex Investment Forex is short for Foreign 2 years 1 year
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Financial Product Explanation TABLE A: CATEGORY I
EXPERIENCE REQUIREMENTS
FOR AN FSP AND
REPRESENTATIVE
1 CATEGORY 1 Advice: Min
Experience
Intermediary
Services:
Min. Exp.
Business Exchange. This is
investment in Foreign
denominated currencies.
A person may wish to invest
in Dollars US in the hope
that they go up in value and
the SA Rand goes down in
value. They would then sell
the Dollars US for SA Rands
and get more SA Rands than
they had before.
1.16 Health Service
Benefits
This is Medical Aids.
A person may only have this
if they are also accredited
with the Council for Medical
Schemes as a Health
Schemes Broker. If the
Health Schemes Broker
accreditation lapses or is
withdrawn then the FSP
authorisation is as well. And
visa versa.
2 years 2 years
1.17 Long-term Deposits This is a Bank deposit which
cannot be accessed within a
6 months 3 months
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Financial Product Explanation TABLE A: CATEGORY I
EXPERIENCE REQUIREMENTS
FOR AN FSP AND
REPRESENTATIVE
1 CATEGORY 1 Advice: Min
Experience
Intermediary
Services:
Min. Exp.
12 month period. e.g. a 36
month deposit
1.18 Short-term Deposits This is a Bank deposit which
can be accessed within a 12
month period e.g. a normal
transaction bank account,
call account and a 32 day
call account.
6 months 3 months
1.19 Friendly Society
Benefits
A society in which the
members contribute a
specific sum of money on a
regular basis for a specific
purpose – e.g. own
retirement fund.
6 months 2 months
1.20 Long Term Insurance
subcategory B2
Death, disability, health,
investment policies,
annuities which have a
guarantee of a minimum
return of premium or a
guaranteed pay out.
Example: Endowment /
Education
1 year 6 months
1.21 Long-Term Insurance
Subcategory B2-A
Long term policies which
requires premiums to be
1 year 6 months
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Financial Product Explanation TABLE A: CATEGORY I
EXPERIENCE REQUIREMENTS
FOR AN FSP AND
REPRESENTATIVE
1 CATEGORY 1 Advice: Min
Experience
Intermediary
Services:
Min. Exp.
invested in an investment
portfolio with no option to
change or amend
1.22 Long-Term Insurance
Subcategory B1-A
Long term policies which
requires little or no
underwriting
1 year 6 months
1.23 Short Term Insurance
Personal lines A1
Short Term policies that
require limited or no
underwriting, with terms of
24 months or less
Example: Dent & Fix cover
1 year 6 months
1.24 Structured deposits Combination of a short
term deposit & long term
deposit & Tier 1 product
2 years 1 year
1.25 Securities and
instruments
Benefit provided by a
retirement fund,
preservation provident fund
2 years 1 year
1.26 Participatory interest
in a CIS Hedge Funds
Collective investment
scheme that is a Hedge
fund
2 years 1 year
CATEGORY II
Sub Experience requirements for FSP’s and Reps Min Experience
2.1 Long-term Insurance Category B1 2 years
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2.2 Long-term Insurance Category C 2 years
2.3 Retail Pension Benefits 2 years
2.4 Pension Fund Benefits 2 years
2.5 Securities and instruments: Shares 3 years
2.6 Securities and Instruments: Money market instruments 3 years
2.7 Securities and Instruments: Debentures and securitised
debt
3 years
2.8 Securities and Instruments: Warrants, certificates and other
instruments acknowledging debt
3 years
2.9 Securities and Instruments: Bonds 3 years
2.10 Securities and Instruments: Derivative instruments
excluding warrants
3 years
2.11 Participatory Interests in one or more collective Investment
schemes
2 years
2.12 Forex Investment Business 3 years
2.13 Long-term Deposits 1 year
2.14 Short-term Deposits 1 year
2.15 Long-Term Insurance Subcategory B2 2 years
2.16 Long-Term Insurance Subcategory B2-A 2 years
2.17 Long-term Insurance Subcategory B1-A 2 years
2.18 Structured deposits 3 years
2.19 Securities and instruments 3 years
2.20 Participatory interest in a CIS Hedge Funds 3 years
Experience requirements for FSP’s and Reps Advice: Min Experience
CATEGORY II A
Hedge Funds 3 years
CATEGORY III
Administrative FSP who places funds in investments 3 years
CATEGORY IV
RE5 Training Manual – Updated May 2018 109
Administration of Funeral Products in terms of an Agreement
between the FSP and the Insurer
1 year
Important notes:
1. Category 1.1 & 1.19 only requires ABET Level 1 (Grade 3 / Standard 1), or the ability
to read, write and calculate
2. Category 1.1, 1.2, 1.6, 1.16 & 1.19 does not fall under Category 2
3. There are 26 categories under Subcategory 1
FICA
Whereas FICA tries to establish who we are dealing with, FAIS tries to ensure that we deal
with them properly, responsibly and professionally.
As we have discussed, FAIS aims to regulate the giving of advice and rendering of
intermediary services to clients and imposes responsibility by requiring that i) the financial
needs of the client has to be evaluated, ii) appropriate advice - having established the
relevant facts – is to be given, and iii) clients be assisted to make informed decisions, whilst
establishing a complaints resolution mechanism.
With regards to FICA: internationally, governments have agreed to fight organised crime and
terrorism by, among others, seizing the proceeds of crime and making money laundering a
criminal offence. Since the 1980s many countries have passed laws that demonstrate their
commitment to this effort.
South Africa has implemented a law in line with international law that is designed to combat
money laundering, which is the abuse of financial systems in order to hide and/or disguise
the proceeds of crime. This law is known as the Financial Intelligence Centres Act 28 of
2001, also referred to as FICA.
The establishment of this Centre and a Money Laundering Advisory Council in order to
combat money laundering activities also imposed certain duties on institutions and other
RE5 Training Manual – Updated May 2018 110
persons who might be used for money laundering purposes. The FICA Act amended the
Prevention of Organised Crime Act, 1998, and the Promotion of Access to Information Act,
2000.
In terms of FICA, all accountable institutions (such as banks) have specific duties to help
prevent and reporting on money laundering. It creates money laundering control obligations
for banks and other institutions and professionals, such as estate agents, brokers, attorneys
and insurance companies. A person is however obligated to report any suspicious
transactions that pertain to any business to the Financial Intelligence Centre (“FIC").
Suspicion is a subjective element therefore one must determine what constitutes a
suspicious transaction with respect to the business that you operate. Any activity, which
falls outside the standard daily practice, would, for example be considered to be suspicious.
Purpose of FICA
• To establish a Financial Intelligence Centre and a Counter-Money Advisory Council to
combat money laundering and the financing of terrorist and related activities
• To impose duties on institutions used for the above purposes
• To provide for the registration of accountable and reportable institutions
• To amend the POC Act
Training and compliance with FICA An accountable institution must
• Provide training to its employees to ensure compliance with the Act
• Appoint a person responsible for compliance with FICA by
Record Keeping
Accountable institutions need to keep records of the following:
• The identity of the client
• If the client is acting is acting on behalf of another person
• Identity of the other person
RE5 Training Manual – Updated May 2018 111
• Client’s authority
• If another person is acting on behalf of the client
• Identity of the other person
• Other person’s authority
• Manner in which the identity was established
• Nature of the business relationship
• Transaction amounts and parties involved
• All accounts involved in the transaction(s)
• Name of the person who obtained the information
Methods of Record Keeping
Records can be kept in electronic form
For at least 5 years from:
• Establishment of the business relationship
• Date when the relationship is terminated
• Date of when the transaction is concluded
Records kept by a 3rd party
Records may be kept by a 3rd party as long as:
• The accountable institution has free and easy access to records
• The accountable institution is liable if the 3rd party fails to comply
• The accountable institution must provide the Centre with the details of the 3rd party
o Full name and contact details of person who exercises control over those
records
o Address where the records are kept
o Address from where the 3rd party exercises control over the records, and
o Full name and contact particulars of the individual who liaises with the 3rd
party on behalf of the accountable institution concerning the retention of
records
o The name under which the 3rd party conducts business
RE5 Training Manual – Updated May 2018 112
Admissibility of the Records
Records kept are admissible as evidence
Centre’s access to Records
• An authorised representative of the Centre has access to records during ordinary
working hours and may examine, make extracts from or copies of records
• The representative may only do this if s/he has a warrant issued in chambers in the
area of jurisdiction, unless the records are available to the public
• The warrant will only be issued if there are reasonable grounds to believe that the
records may assist to identify the proceeds of unlawful activities or to combat money
laundering activities
• The warrant may contain conditions regarding access to the records
• The accountable institution must give the Centre’s representative all reasonable
assistance
Internal Rules The following internal rules forms part of the Financial Service Providers (FSP), and applies
to all Key Individuals, representatives, and members of staff in all their business activities.
The following laws were considered in compiling these Internal Rules:
• Financial Intelligence centre Act 38 of 2001 (and Regulations)
• Prevention of Organised Crime Act 121 of 1998 (and regulations)
• Industry Guidance Notes
• Financial Intelligence Centre Guidance notes
RE5 Training Manual – Updated May 2018 113
What is Money Laundering “Money laundering refers to any act that obscures the illicit nature or the existence,
location or application of proceeds of crime and includes the processing of proceeds
received from criminal activities, to disguise their origin” as per FICA Act.
In general, money laundering refers to where criminals find ways and means to disguise
their proceeds from criminal activities. They “clean” their “dirty” money, by using several
entities, to ensure that it looks as if they earned their money with normal business dealings.
It changes the nature and location of the proceeds of their criminal activities.
Any criminal, which can include drug traffickers, robbers, terrorists, burglars and fraudsters,
will need to hide their money, and therefore will use institutions camouflage their
relationship with crime.
Additional sources for money laundering: The following sources will enable you to enhance your knowledge and understanding of
money laundering control:
• http://www.fatf-gafi.org/
• http://general.rau.ac.za/law
Offences and Penalties The offences and penalties created in the Financial Intelligence Centre Act, 38 of 2001 are
set out below:
Offence Penalty
Failure to identify (sec. 6) Maximum period of 15 years (Sec. 46)
imprisonment or a fine not
exceeding R10 000 000
Failure to keep records
(sec. 47)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Destroying or tampering with
records
Maximum period of 15 years
imprisonment or a fine not
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Offence Penalty
(Sec. 48) exceeding R10 000 000
Failure to give assistance
(Sec. 49)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Failure to advise the Centre
(Sec. 50)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Failure to report cash
Transactions (Sec. 51)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Failure to report suspicious or
unusual transactions
(Sec. 52)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Unauthorised disclosure
(Sec. 53)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Failure to report conveyance of
cash into or our of the Republic
(Sec. 54)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Failure to send a report to the Centre (Sec.
55)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Failure to report electronic
Transfers (Sec. 56)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Failure to comply with requests (Sec. 57)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Failure to comply with a direction Maximum period of 15 years
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Offence Penalty
by the Centre (Sec. 58)
imprisonment or a fine not
exceeding R10 000 000
Failure to comply with monitoring
Order (Sec. 59)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Misuse of information (Sec. 60)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Failure to formulate and implement internal
rules (Sec. 61)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Failure to provide training or appoint
compliance officer (Sec. 62)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Obstructing Centre officials in the
performance of functions (Sec. 63)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Conducting transactions to avoid reporting
duties (Sec. 64)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Unauthorised access to computer system or
application or data (Sec. 65)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
Unauthorised modification of contents of
computer system (Sec. 66)
Maximum period of 15 years
imprisonment or a fine not
exceeding R10 000 000
A person convicted in terms of FICA Maximum period of 15 years
imprisonment or a fine not
exceeding R100 000 000
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Transactions to be reported FICA identifies two broad types of transactions that must be reported:
1. Threshold transactions: cash and electronic fund transfers
2. Cash Transactions
Certain acts and transactions involving cash in amounts greater than the set limit as well as
certain transfers of money into and out of the Republic must be reported.
Cash for these purposes, means:
• South African notes and coins
• Similar currency of other countries;
• Traveller’s Cheques
Cash Reporting The reporting of cash transactions relates to two main areas to the payment and receipt of
cash by the Financial Service Provider:
• When cash is in excess of a set amount is paid out to a client of his representative
• Or is received from a client or from his representative
What is the prescribed limit?
• The prescribed limit will be R24, 999.99
• This means that any amount above R24, 999.99 must be reported by the
Accountable and reportable institutions.
International Electronic Transfers An international electronic transfer by an accountable institution must be reported if:
• The transfer involves money in excess of a prescribed amount; and
• The transfer is made on behalf of or on the instructions of another person, for
example a client
The Minister has not yet established the threshold for the above 2 transactions, however
RE5 Training Manual – Updated May 2018 117
suspicious transactions must still be reported.
Exemptions Some of the exemptions, include the following:
• any reinsurance policy issued to another accountable institution;
v any long-term insurance policy in respect of which recurring premiums are
paid which will amount to an annual total not exceeding R25 000 00, subject
to the condition that the provisions of Parts 1 and 2 of Chapter 3 of the Act
have to be complied with in respect of every client.
• Who increases the recurring premiums so that the amount of R25 000 00 is
exceeded;
• Who surrenders such a policy within three years after its commencement; or
• To whom that accountable institution grants a loan or extends credit against the
security of such a policy within three years after its commencement
v any long-term insurance policy in respect of which a single premium not
exceeding R50 000 00 is payable, subject to the condition that the provisions
of Parts 1 and 2 of Chapter 3 of the Act have to be complied with in respect
of every client
• Who surrenders such a policy within three years after its commencement; or
• To whom that accountable institution grants a loan or extends credit against the
security of such a policy within three years after its commencement;
• any contractual agreement to invest in unit trust or linked product investments in
respect of which recurring payments are payable amounting to an annual total not
exceeding R25 000 00, subject to the condition that the provisions of Parts 1 and 2 of
Chapter 3 of the Act have to be complied with in respect of every client who
liquidates the whole or part of such an investment with one year after the making of
the first payment;
• any unit or linked product investment in respect of which a once off consideration
not exceeding R50 000 00 is payable, subject to the condition that the provisions of
Parts 1 and 2 of Chapter 3 of the Act have to be complied with in respect of every
RE5 Training Manual – Updated May 2018 118
client who liquidates the whole or part of such an investment within one year after
the making of the first payment;
Verifying the residential address of a client: The general rule is that any document that will be accepted, as proof of address, needs to
be within the last 3 months.
The following may offer confirmation of residential address:
• a utility bill reflecting the name and residential address of the person;
• a bank statement from another bank reflecting the name and residential address of
the person if the person previously transacted with a bank registered in terms of the
Banks Act and that bank had confirmed the person’s particulars;
• a recent lease or rental agreement reflecting the name and residential address of the
person;
• municipal rates and taxed invoice reflecting the name and residential address of the
person;
• mortgage statement from another institution reflecting the name and residential
address of the person;
• telephone or cellular account reflecting the name and residential address of the
person;
• valid television licence reflecting the name and residential address of the person;
• recent long-term or short-term insurance policy document issued by an insurance
company and reflecting the name and residential address of the person; or
• recent motor vehicle licence documentation reflecting the name and residential
address of the person.
When a recent utility bill from a telephone or cellular account, Eskom or a local authority
does not identify the physical address of the property owner (that is, if the bill is sent to a
postal address), the utility bill will still be acceptable provided the client’s name and the
erf/stand and township details are reflected on the utility bill.
RE5 Training Manual – Updated May 2018 119
The client’s physical address, erf number and township should be recorded, and the
township cross-referenced to the suburb in which the client resides.
If thereafter there is any doubt about the client or the physical address of the client, the
erf/stand and township details should be verified by reference to the Deeds Office.
If none of the above is available, other means to verify a client’s address such as an affidavit
containing the following particulars from a person co-habiting with the client or an
employer of the client:
• name, residential address, identity number of the client and the deponent (person
who makes the affidavit under oath) of the affidavit;
• relationship between the client and the deponent of the affidavit; and
• confirmation of the client’s residential address.
Each accountable institution is responsible for establishing which documentation is
acceptable to verify the obtained information, within the internal risk framework of the
accountable institution
Manner of identification The following information needs to be identified:
• Full name
• Date of birth
• Identity number
• Income tax registration number (if issued to such a person); and
• Residential address
NB – When you collect any information, it must be within the last 3 months
You are required to collect documents as proof of the information requested from the client
and where you will compare the information obtained from the client with documentation
that confirms the information.
List of accountable institutions
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• A practitioner who practices as defined in section 1 of the Attorneys Act, 1979 (Act
53 of 1979).
• A board of executors or a trust company or any other person that invests, keeps in
safe custody, controls or administers trust property within the meaning of the Trust
Property Control Act, 1988 (Act 57 of 1988).
• An estate agent as defined in the Estate Agency Affairs Act, 1976 (Act 112 of 1976).
• An authorised user of an exchange as defined in the Securities Services Act, 2004
(Act 36 of 2004).
• A manager registered in terms of the Collective Investment Schemes Control Act,
2002 (Act 45 of 2002), but excludes managers who only conduct business in Part VI
of the Collective Investment Schemes Control Act (Act 45 of 2002).
• A person who carries on the "business of a bank" as defined in the Banks Act, 1990
(Act 94 of 1990).
• Mutual bank as defined in the Mutual Banks Act, 1993 (Act 124 of 1993).
• A person who carries on a "long-term insurance business" as defined in the Long-
Term Insurance Act, 1998 (Act 52 of 1998).
• A person who carries on a business in respect of which a gambling licence is required
to be issued by a provincial licensing authority.
• A person who carries on the business of dealing in foreign exchange.
• A person who carries on the business of lending money against the security of
securities.
• A person who carries on the business of a financial services provider requiring
authorization in terms of the Financial Advisory and intermediary Services Act, 2002
(Act 37 of 2002), to provide advice and intermediary services in respect of the
investment of any financial product (but excluding a short term insurance contract
or policy referred to in the Short-term Insurance Act, 1998 (Act 53 of 1998) and a
health service benefit provided by a medical scheme as defined in section 1(1) of
the Medical Schemes Act, 1998 (Act 131 of 1998).
• A person, who issues, sells or redeems travellers' cheques, money orders or similar
instruments.
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• The Postbank referred to in section 51 of the Postal Services Act, 1998 (Act 124 of
1998).
• The Ithala Development Finance Corporation Limited.
• A person who carries on the business of a money remitter. Example: Western Union
Reportable Institutions
• Entities who deals in motor vehicles
• Entities who deals in Kruger Rands
Glossary of Terms on FICA Term Definition
Accountable Institution
Institutions which have been identified as being vulnerable
to money laundering, as such they have specific obligations
regarding money laundering (FICA Schedule 1)
Business Relationship
An arrangement between a client and an accountable
institution for the purpose of concluding transactions on a
regular basis
FIC
Financial Intelligence Centre – The entity created in terms
of FICA to receive and analyse suspicious transactions
FICA
The Financial Intelligence Centre Act, 38 of 2001 – The
South African legislation which imposes money laundering
control obligations on all major financial institutions
Money Laundering
An activity which has or is likely to have the effect of
concealing or disguising the nature, source, location,
disposition or movement of the proceeds of unlawful
activity
POCA
The Prevention of Organised Crime Act 121 of 1998 – South
Africa legislation which creates the main money laundering
offences and provides for the forfeiture of the proceeds of
RE5 Training Manual – Updated May 2018 122
Term Definition
crime
Proceeds of Crime
Any financial benefit that a criminal derives from any
criminal activity
Smurfing, Splitting,Structuring
Money Laundering methods which involve the splitting of
proceeds of crime into smaller amounts to avoid
detection
STR
Suspicious and Unusual Transaction Report
RE5 Training Manual – Updated May 2018 123
TransitionalProvisions
The transitional provisions apply to persons registered prior to the updates in April 2018
and this should not be necessary to know for the exam
Qualifications; • For a particular product and service if obtained prior to 01 January 2010
Or
• That complied with the qualifications in the previous Fit & Proper requirements
Is deemed to meet the requirements for that particular product and service that they are
authorised for at the commencement date of this Notice – 01 April 2018
Experience Experience that the FSP or representative had prior to commencement of this Notice is
recognised 01 April 2018
BUT
Excludes persons working under supervision
Product Specific Training An FSP or representative authorised for specific products (excluding a rep under
supervision) at commencement of this Notice 01 April 2018 is deemed to have completed
the Product Specific Training for the Products they were authorised for
But;
Does not apply to amendments to those particular products made after 01 April 2018
RE5 Training Manual – Updated May 2018 124
A rep working under supervision as at 01 April 2018 has three months (i.e. to end June
2018) to complete the Product Specific training
A person appointed after 01 April 2018 but prior to 01 May 2018 has three months to
comply with the Product Specific training
Class of Business training
• An FSP, KI or Rep of Cat I, Cat II, Cat IIA, Cat III, Cat IV - excluding a person working
under supervision – appointed prior to 01 April 2018, is deemed to have completed
COB training for their existing products
• A Cat I KI is deemed to have completed the COB for the products for which they are
approved and which the FSP is approved for as at 01 April 2018 2018 has 12 months
from 01August 2018 to comply with COB
• A person authorised between 01 April and 01 August 2018 has 12 months to comply
with COB
However (Very Important) • The KI of Cat I must within 6 months of 01 April 2018 (i.e. before end August 2018)
submit the details of the COB’s which they work with to the Registrar on the form to
be provided
• A rep working under supervision as at 01 April 2018 has 12 months from 01 August
2018 to comply with COB
• A person authorised between 01 April and 01 August 2018 has 12 months to comply
with COB
Reps register and FSP licence
The categories and sub-categories listed on an FSP licence will be amended by the Registrar
to include the corresponding new financial products
RE5 Training Manual – Updated May 2018 125
But the FSP is deemed to be authorised for these until the amendment is made
TABLE C
Column A Column B
Short Term Insurance Personal Lines Short Term Insurance Personal Lines
A-1
Long Term Insurance sub-category B1 Long Term Insurance sub-category
B1-A
Long Term Insurance sub-category B2 Long Term Insurance sub-category
B2-A
The FSP with the additional new products as shown above, must;
Within 3 months of the amendment
• Update the reps register accordingly and use the same start date as was previously
recorded on the register
• Persons appointed on or after 01 April must have the actual start dates entered on
the register
An FSP that is authorised for the financial products and services listed in Column A of the
Table below as at 01 April 2018 is deemed to be authorised for the products and services in
Column B
BUT
Must submit an application for authorisation within 3 months of 01 April 2018 (i.e. before
end June 2018)
Summaryoftimelines
RE5 Training Manual – Updated May 2018 126
Aspect Time period
When found guilty on Honesty & Integrity,
excluding disqualified or prohibited by a
court of law
Never – depending on seriousness and
passage of time
When found guilty on Honesty & Integrity
and when disqualified or prohibited by a
court of law
Never – depending on seriousness and
passage of time
Minimum period that a Rep can work under
supervision
12 months
Maximum period that a Rep can work under
supervision
6 years
Period to complete the First Level RE from
DOFA
2 years
Period to complete the appropriate
qualification required from DOFA (excluding
2004 – 2009 persons)
6 years, before cut-off 30 June
FSP to update changes on the Rep Register 15 days
Number of days to remove Rep/KI’s name
off the Rep Register after the Registrar
debarred them
5 days
Number of days for FSP’s to remove Rep/KI’s
name off the Rep Register after the Registrar
debarred them
15 days
Number of years that the Registrar usually
debars a person
2 – 5 years
Number of days to appeal a decision made
by the Registrar or Ombud
30 days
Minimum number of months after which a
debarred Rep can apply of reappointment
(excl. honesty & integrity issues)
12 months
KI requires number of years’ experience in 1 year
RE5 Training Manual – Updated May 2018 127
Aspect Time period
overseeing and management
Experience should have been gained for
both Reps & Ki’s within how many years
5 years (Consecutively)
Number of days to report any changes to the
FSB (now the FSCA) , excluding change of
financial year end
15 days
Minimum period to keep records in terms of
FAIS
5 years
Minimum period to keep records in terms of
FICA
5 years
Number of days to provide information
requested by the Registrar in writing
7 days
Within how many days must funds received
from clients be paid into a bank account
1 business day
Number of days within which clients must
receive written confirmation of disclosure
made orally
30 days
How often must the FSP conduct a review of
the Conflict of Interest Management Policy?
Every year
What is the time period within which to
resolve complaints received?
6 weeks
For how long do copies of complaints need
to be kept by the FSP?
5 years
Within which time period must an aggrieved
client submit their complaint to the Ombud
once the FSP has provided a resolution to
the complaint (if client is not satisfied with
the outcome)?
6 months
When a provider advertises by means of
telephone, and it does not result in the
45 days
RE5 Training Manual – Updated May 2018 128
Aspect Time period
conclusion of a financial transaction, for how
longs to records have to be kept?
And if it leads to a conclusion of a financial
transaction?
5 years
Regarding civil remedies, after which period
will unclaimed monies accrue to the
Registrar from date of 1st distribution
3 years
Number of years that a person guilty of a
FAIS penalty could be imprisoned for
10 years
Once the Registrar published his notice to
declare an FSP an undesirable business
practice, how many days does the FSP have
to make written representations?
21 days
If the FSP continues after the Registrar as
declared them an undesirable business
practice, how many days does the Registrar
allow to rectify?
60 days
Number of years that an Accountable
Institution need to keep records in terms of
FICA
5 years
Where a member of a CC who is a
Compliance Practice dies, how many months
can the estate of the deceased member hold
interest?
6 months
Number of years’ experience that a
Compliance officer must have in risk
management or compliance
3 years
Number of years’ experience that a
Compliance officer must have in risk
management or compliance within the
1 year
RE5 Training Manual – Updated May 2018 129
Aspect Time period
specific product category
Prescription period within which a client
must lodge a complaint with the Ombud
from the date when the act or omission
occurred
3 years
Period that the Ombud can imprison a
person who purposefully interrupt
proceedings
1 year
Annexure1
Tier 1 and Tier 2 Financial Products
TABLE 1 Financial Products
Column A Tier 1 Financial Products
Column B Tier 2 Financial Products
Structured Deposits
Short-term Personal Lines A1
Short-term Personal Lines
Long-term Insurance subcategory A
Short-term Commercial Lines
Long-term Insurance subcategory BI-A
Long-term Insurance subcategory B1
Long-term Insurance subcategory B2-A
Long-term Insurance subcategory B2
Friendly Society Benefits
Long-term Insurance subcategory C
Short-term Deposits
Retail Pension Benefits
Long-term Deposits
Pension Fund Benefits
Participatory interest in a collective investment scheme
Participatory interest in a CIS hedge fund
RE5 Training Manual – Updated May 2018 130
TABLE 1 Financial Products
Column A Tier 1 Financial Products
Column B Tier 2 Financial Products
Forex investment
Health Service Benefits
Shares
Money Market instruments
Debentures and securitised debt
Warrants, certificates and other instruments
Bonds
Derivative instruments
Securities and Instruments
Annexure2
CLASSES OF BUSINESS 1. In this Annexure- "Accident and health policy" has the meaning assigned to it in section 1(1) of the Short-term Insurance Act, but excludes a reinsurance policy in respect of such a policy; "Assistance policy" has the meaning assigned to it in section 1(1) of the Long-term Insurance Act but excludes a reinsurance policy in respect of such a policy; "Engineering policy" has the meaning assigned to it in section 1(1) of the Short-term Insurance Act, but excludes a reinsurance policy in respect of such a policy;
RE5 Training Manual – Updated May 2018 131
"Fund policy" has the meaning assigned to it in section 1(1) of the Long-term Insurance Act but excludes a reinsurance policy in respect of such a policy; "Guarantee policy" has the meaning assigned to it in section 1(1) of the Short-term Insurance Act, but excludes a reinsurance policy in respect of such a policy; "Long-term investment policy" means a life policy as defined in section 1(1) of the Long-term Insurance Act other than a life risk policy; "Liability policy" has the meaning assigned to it in section 1(1) of the Short-term Insurance Act, but excludes a reinsurance policy in respect of such a policy; "Life risk policy" means a disability, health or life policy as defined in section 1(1) of the Long-term Insurance Act that provides risk benefits only; "Long-term reinsurance policy" means a reinsurance policy as defined in section 1(1) of the Long-term Insurance Act; "Miscellaneous policy" has the meaning assigned to it in section 1(1) of the Short-term Insurance Act, but excludes a reinsurance policy in respect of such a policy; "Motor policy" has the meaning assigned to it in section 1(1) of the Short-term Insurance Act, but excludes a reinsurance policy in respect of such a policy; "Property policy" has the meaning assigned to it in section 1(1) of the Short-term Insurance Act, but excludes a reinsurance policy in respect of such a policy; "Short-term reinsurance policy" has the meaning assigned to it in section 1(1) of the Short-term Insurance Act; "Sinking fund" has the meaning assigned to t :n section 1(1) of the Long-term I nsurance Act but excludes a reinsurance policy in respect of such a policy; "Transportation policy" has the meaning assigned to it in section 1(1) of the Short-term Insurance Act, but excludes a reinsurance policy in respect of such a policy.
TABLE 1 CLASSES OF BUSINESS
1 Short-term Insurance :Personal Lines Subclasses
1.1 Personal Lines : Accident and health policy 1.2 Personal Lines : Liability policy 1.3 Personal Lines: Miscellaneous policy 1.4 Personal Lines: Motor policy 1.5 Personal Lines: Property policy
RE5 Training Manual – Updated May 2018 132
1.6 Personal Lines : Transportation policy 1.7 Personal Lines : Short-term reinsurance policy
2. Short-term Insurance : Commercial Lines
Subclasses 2.1 Commercial Lines : Accident and health policy 2.2 Commercial Lines :Engineering policy 2.3 Commercial Lines : Guarantee policy 2.4 Commercial Lines : Liability policy 2.5 Commercial Lines : Miscellaneous policy 2.6 Commercial Lines : Motor policy 2.7 Commercial Lines : Property policy 2.8 Commercial Lines : Transportation 2.9 Commercial Lines : Short-term reinsurance policy 3 Long-term Insurance Subclasses 3.1 Assistance Policy 3.2 Life Risk Policy 3.3 Life Investment Policy 3.4 Fund Policy 3.5 Sinking Fund Policy 3.6 Long-term Reinsurance policy 4. Pension Fund Benefits 5. Short-term and Long-term Deposits 6. Structured Deposits 7. Investments Subclasses 7.1 Shares 7.2 Money Market Instruments 7.3 Debentures and securitised debt 7.4 Bonds 7.5 Derivative instruments, warrants, certificates and other instruments 7.6 Securities and instruments 7.7 Participatory interests in a collective investment scheme 7.8 Participatory interests in a CIS hedge fund 7.9 Retail Pension Benefits 8. Forex Investments 9. Health Services Benefits
RE5 Training Manual – Updated May 2018 133
Sources:
• INSETA (RE5) Material
• Extracts of the Act (Charmaine Koch - IISA)
• René Ronge (License to Skill)
• Danie Theunissen (ThirtyEleven)
• Sue Liebenberg (Compliance officer)
• Pervina Soma (Compliance officer)
• FSB Communication and Board Notices
• FSCA Communication